Global Gaming Business, June 2014 by Global Gaming Business

GGB Global Gaming Business Magazine

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June 2014 • $10 • Vol. 13 • No. 6

Massachusetts Morass

The iGaming Jackpot Analyzing the first year of online wagering in the U.S.

WILL

How one state can mess up the legalization process

THE

BUBBLE

BURST? How saturation is impacting the gaming industry

Official Publication of the American Gaming Association

BallyTech.com 866.316.1777

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CONTENTS

Vol. 13 • No. 6

june

Global Gaming Business Magazine

COLUMNS

COVER STORY Page 26

14 AGA

Crowded Markets

New Talent, New Mission

A look at the state of today’s casino market in the United States, and an analysis of how much of a problem market saturation is becoming:

Geoff Freeman

16 Fantini’s Finance International Vision Frank Fantini

26 Expansion vs. Contraction Not too long ago, many viewed the United States as one of world’s underserved gaming markets. Now, with casinos in practically every region, have we gone too far?

18 Regulation My Trip to Atlantic City Richard Schuetz

By David G. Schwartz

48 Global Gaming Women Mentoring is a Two-Way Street

32 Tribal Bust? For years, it was nothing but growth for the tribal gaming market. However, as Indian gaming matures and growth slows, tribes look to diversify. By Dave Palermo

FEATURES

GGB iGAMES

50 New Game Review 60 Emerging Leaders With American Gaming Systems’ David Lopez and Reed Exhibitions’ Mike Johnson

62 Frankly Speaking 64 Cutting Edge

44 iGames News Roundup

66 Goods & Services

iGNA Outlook

69 People

46 California Here We Come Sue Schneider

36 The Bay State Crawl

By George Brennan

6 Dateline

Feature

20 The Internet Frontier

Local rejection, regulatory confusion and tribal uncertainty mark Massachusetts’ long road to implementing its casino law.

4 The Agenda

13 Nutshell

From social gaming to realmoney online casinos, operators are showing how internet gaming can work to bring new customers to land-based casinos. By Rodric J. Hurdle-Bradford

By Marjorie Preston

DEPARTMENTS

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

40 Online to Offline

What some see as the slow start for iGaming in the United States is expected for a startup industry, say experts, who advise that the best of internet gaming is yet to come.

London Swinney

54 High-Tech Tables

70 Casino Communications With Dermot Smurfit, Chief Executive Officer, Game Account Network

Improvements in player tracking, security, utility products and the games themselves mark a new day for table games. By Dave Bontempo and Frank Legato

JUNE 2014 www.ggbmagazine.com

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THE AGENDA

Backing the Boardwalk Roger Gros, Publisher

y life has been intertwined with Atlantic City for years. I was an original dealer at the city’s second casino, the Boardwalk Regency, now Caesars Atlantic City. Four of my five children were born in Atlantic City. I wrote my first words about the industry in Atlantic City. And I still have a house in Atlantic City that I love dearly. So that’s why the decline of Atlantic City has been so painful for me. In this issue, where we highlight the saturation that the gaming industry is encountering, Atlantic City is the poster child of this phenomenon. The incursion of competition into the surrounding states has decimated a market that hadn’t seen a revenue decline in 30 years. Now, in hindsight, so-called “experts” wonder why Atlantic City didn’t do more to avoid this situation. But what could be done? In gaming, like real estate, it’s all about “location, location, location.” Who can ever forget Tunica County in Mississippi? When gaming first came to a section of the county along the river, four or five casinos popped up and were raking money in hand over fist. But when an area opened about 15 minutes closer to the major Memphis market a year later, those casinos closed in quick order. So when customers could go to casinos in Delaware, Pennsylvania and New York, saving anywhere from one to two hours of driving, Atlantic City was doomed. Let’s look back in history to the time Atlantic City was booming with no competition. In the 1980s, money was pouring into the city despite efforts by the state to kill the Golden Goose. No sane company was going to invest more money than necessary when the state tried to limit profits and strangle innovation. Tom Kean, who was governor most of those years, appointed regulators who were consistently opposed to any expansion. Kean, however, did appoint the one regulator who began to turn the mighty regulatory ship, Frank J. “Pat” Dodd. So in the ’90s, with the regulatory squeeze easing, Paul Rubeli, who ran the parent company of the Tropicana, produced a study that pointed out that customers who stayed in hotel rooms were immensely more profitable than players who drove in or were bussed in. So a boom in hotel rooms started, resulting in large properties, some of which now exceed

Global Gaming Business JUNE 2014

2,000 rooms. Many thought that would be Atlantic City’s salvation, but casino executives would rather have players producing those profits in those rooms rather than conventioneers, always the lifeblood of Atlantic City. When Borgata opened in 2003, despite fears to the contrary, it truly expanded the market with a modern building and amenities, and better customer service. Plans were drawn up for other “Borgatastyle” hotels. But then the bottom fell out. After Atlantic City weathered Northeast expansion in Connecticut and Delaware in the 1990s, casino executives were cavalier about similar expansions in Pennsylvania and New York, to their everlasting chagrin. It took just as long for customers to get to Delaware and Connecticut casinos as it did to get to Atlantic City, but when Pennsylvania and New York introduced gaming, casinos were suddenly closer to home, and the market shrunk as a result. So what could have been done? It’s being done now, albeit a little late in the game. With Governor Chris Christie’s support, Atlantic City has a new marketing organization funded by the casinos. The formerly plodding state agency, the Casino Reinvestment Development Authority, is now directing operations in the tourism district of the city. Online gaming has been approved to help shore up revenues (no pun intended) and become another marketing vehicle. I’ve been accused of being the premier Atlantic City booster. I plead guilty (although I humbly defer to radio talk show host Pinky Kravitz, who anyone who has ever even passed through AC will know). I still live there. I still have faith that Atlantic City can survive, and, yes, thrive. Will Atlantic City ever return to the prominence it once held in the gaming industry? That would be a firm “no.” But it’s still a $2 billion market, nothing to sneeze about, and Atlantic City will “right-size” in a somewhat painful fashion over the next few years. But Atlantic City will always be “something”— whether it’s a South Beach or a Long Beach, it will be unique. No one will ever have what Atlantic City has always had and still has: a concentration of gaming halls along a pristine beach, and a spectacular Boardwalk, with a collection of diverse non-gaming amenities that can be a magnet for the rich and famous, or the desperate and hopeless. Either way, I’ll be there.

Vol. 13 • No. 6 • June 2014 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com David Coheen, North American Sales & Marketing Director dcoheen@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com Becky Kingman-Gros, Chief Operating Officer bkingros@ggbmagazine.com Lisa Johnson, Communications Advisor lisa@lisajohnsoncommunications.com Columnists Frank Fantini | Geoff Freeman Sue Schneider | Richard Schuetz | London Swinney Contributing Editors Dave Bontempo | George Brennan | Joe Dimino Rodric J. Hurdle-Bradford | Renese Johnson Dave Palermo | Marjorie Preston Robert Rossiello | David G. Schwartz

EDITORIAL ADVISORY BOARD Rino Armeni, President, Armeni Enterprises

• Mark A. Birtha, Vice President and General Manager, Fiesta Henderson Casino Hotel

• Julie Brinkerhoff-Jacobs, President, Lifescapes International

• Nicholas Casiello Jr., Shareholder, Fox Rothschild

• Jeffrey Compton, Publisher, CDC E-Reports

• Geoff Freeman, President & CEO, American Gaming Association

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

• Dean Macomber, President, Macomber International, Inc.

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

• Jim Rafferty, President, Rafferty & Associates

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

• Steven M. Rittvo, President, The Innovation Group

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

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

• Roy Student, President, Applied Management Strategies

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

Official Publication

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DATELINE ASIA june2014

Hopes Fade in Vietnam

National Assembly maintains ban on locals gambling

he provisions of a new draft decree on the regulation of Vietnam’s casino industry erect substantial barriers to entry in the form of a US$4 billion investment commitment and the retention of laws that currently bar Vietnamese nationals from participating. Developers will only receive an investment certificate after spending half the required commitment, or $2 billion, according to the draft, which also requires them to show at least 10 years’ experience in the industry to qualify for licensing. The measure throws into doubt a massive mixed-use leisure complex with a casino proposed for the popular tourist spot of Halong Bay. Developers include Halong resort operator Tuan Chau Group, Australian property developer ISC Corp. and U.S. regional casino operator Penn National Gaming. The one bright spot in the draft, which was written by the Ministry of Finance and submitted to the Standing Committee of the National Assembly for consideration, is the scrapping of an existing rule that caps gaming space at 3 percent of total floor area and limits gaming positions to 2,000 slot machines and 180 tables. The big blow, the locals ban, remains in force, however. It is estimated that Vietnamese spend some $800 million in foreign casinos every year. Cambodia’s monopoly NagaWorld casino in Phnom Penh generates more than 40 percent of its gaming revenue from Vietnamese.

Nepal Orders Casinos Closed 10 foreigners-only casinos shuttered for nonpayment of back royalties and fees he Nepal government has declared the country’s 10 casinos illegal and ordered them closed for failing to pay past-due royalties and obtain new licenses. “The ministry didn’t renew licenses of the 10 casinos operating in the premises of different five-star hotels in the country as some didn’t apply for renewal within the given time frame and applications of others were filed without fulfilling due process,” a spokesman for the Ministry of Culture, Tourism and Civil Aviation said. The decision was taken after several deadlines to pay up were extended. It affects eight foreigners-only casinos in Kathmandu and two in Pokhara, all operating in tourist hotels. About 4,000 jobs could be affected, according to news reports. The casinos owe the government a total of 1.07 billion Nepalese rupees (US$11 million) dating back to 2005-2006, according to the ministry, which also complains the casinos do not obey regulations prohibiting Nepalese nationals from entering the venues. The government recently approved new rules reinforcing the ban and introducing mandatory licensing. The new measure also raises the annual royalty fee to 40 million rupees, which the casinos have said they cannot afford to pay and remain profitable. Three closed last year.

Global Gaming Business JUNE 2014

The Grand Ho Tram casino hotel will continue to struggle as long as a local gambling ban remains in effect.

Still, a number of provinces are seeking casinos in hopes of boosting their local economies. Minister of Planning and Investment Bui Quang Vinh says his office has received 10 proposals to date. But, as it stands, observers believe the new rules will ensure the market remains small—it consists currently of six modestly sized foreigners-only venues in the far north near the Chinese border, in Halong, the nearby port city of Haiphong and farther down the coast in Da Nang. It could also mean that the largest investment ever in resort gaming in Vietnam, the $530 million Grand-Ho Tram on the South China Sea about 90 kilometers from Ho Chi Minh City, will continue to struggle. Through February, Ho Tram posted only $5.5 million in gaming revenue after nearly seven months of operation.

Game On! Video game arena planned for Hengqin

15,000-seat video gaming arena is planned as the centerpiece of a US$2.8 billion Macau’s neighboring Hengqin Island theme park proposed by Hong Kong-based developer Lai Fung Group on Macau’s neighboring Hengqin Island. The park, to be called the V-Zone, was conceived about a year ago, when Lai Fung approached AEA Consulting, a New York-based arts and culture firm, for ideas for a plot the group had purchased on the island. “We started with a blank sheet of paper, and we were looking for what would be the fastest-growing field in the world,” says Chew Fook Aun, Lai Fung’s chairman. AEA suggested several potential targets, including music and cars. “The trends were with video gaming,” says Chew. Indeed, more than 500 million people in China play video games, and about 145 million of them play more than an hour daily, according to Eedar, a market research firm. In addition to playing games, an increasing number of people like to watch. Live gaming competitions such as those to be staged at the new arena on Hengqin periodically fill arenas and draw huge online audiences. A League of Legends competition last November attracted 32 million viewers, and a “Call of Duty” tournament last month included a US$1 million prize purse. Hengqin, which lies in the Pearl River Delta adjacent to the booming casino enclave, has drawn about $22 billion worth of investments in commercial, residential and leisure developments, including a large amusement park and several planned non-gaming hotels, and is seen as evolving into a major conduit for visitors from mainland China to Macau.

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DATELINE USA june2014

NEW YORK CASINO APPLICANTS

START SPREAdINg ThE NEWS

Wide range of applicants eye four upstate New York casinos

ontenders for New York state’s coveted first four casino licenses ponied up $1 million each in nonrefundable fees last month, just to throw their hats in the ring. Applicants include several of the world’s biggest casino owners, a clutch of local developers, and an unlikely team of rivals-turned-partners, Penn National Gaming and the Cordish Companies. A total of 22 groups are now in the running. Last fall, voters approved a sweeping gaming expansion that will bring four commercial casinos upstate, to be followed in seven years by three additional casinos elsewhere in the state. The first four will be located in the Catskill Mountains, the Southern Tier, and the Capital region, which includes Albany and Saratoga. The concepts range from Vegas-style casinos an hour from New York

City to contemporary casinos built on the sites of once-thriving Borscht Belt resorts. There’s even a casino proposed for Schoharie County, where the main attraction is a cave. Las Vegas-based Caesars Entertainment has proposed a $750 million casino complex at the Woodbury Commons shopping mall, 50 miles north of Midtown Manhattan. “The site is ideally suited for the development of a resort casino given its proximity to transportation and other attractions,” Caesars CEO Gary Loveman said in a statement. Genting Group, which operates the Resorts World Casino at Aqueduct Racetrack in Queens, says it plans to build a casino at the site of the state’s Renaissance Fair in Tuxedo. The Malaysian company, which is also building a megaresort in Las Vegas, has invested heavily in South Florida.

The End of the Road Cosmo sold to real estate developer

T Capital Project MGM Maryland casino on fast track

fter pressure from MGM Resorts International to expedite the permit process and county-level approval of gambling, the MGM National Harbor project in Prince George’s County has begun site preparation, and groundbreaking and construction schedules appear to be on line for the $925 million casino resort’s planned July 2016 opening. Last month, the Prince George’s County Council adopted legislation allowing gambling in the county, a requirement for the project to move forward. Additionally, according to a report in the Washington Post, County Executive Rushern Baker and MGM officials are finalizing the development agreement securing local hiring and contracting for the project. MGM has already invested $50 million in the project, and officials of the operator say delays in the project would delay an estimated $700 million or more in gaming revenue from the casino, more than $40 million pegged for Prince George’s County alone.

he star-crossed Cosmopolitan Las Vegas was sold last month by Deutsche Bank, which foreclosed on the property after the original developer defaulted, to real estate operator Blackstone Group, for $1.7 billion. The hotel features nearly 3,000 rooms, with a 110,000-square-foot casino. The resort, conceived during a real estate boom, was under construction by developer Bruce Eichner when the recession bottomed out. Originally priced at less than $800 million, it was supposed to open in 2008. With the economic downturn and the change of ownership, the Cosmopolitan did not open until December 2010. By that time, costs had ballooned to almost $4 billion. And in its first three years of operations, the Cosmo has accrued net losses of $298.3 million. Deutsche Bank had been shopping the property since it took it over, but found no willing purchasers. The company then hired Caesars Palace executive John Unwin to run it, and it has been very successful as a non-gaming venue. The lack of a database has always been the Achilles Heel for the Cosmo. While thousands of people descend on the property every week to enjoy top-flight concerts and events, as well as an active nightclub scene, those crowds rarely cross over to the casino. Union speculated on whether Blackstone would hire an operator for the gaming operations, mentioning such companies as Caesars

Catskills • Caesars Entertainment (Orange County) • Concord Kiamesha LLC and Mohegan Gaming New York LLC (Sullivan County) • The Cordish Companies/Penn National Gaming (Orange County) • Empire Resorts (Sullivan County) • Greenetrack, Inc. (Orange County) • Foxwoods (Sullivan County) • Nevele (Ulster County) • The Genting Group (Orange County) • Saratoga Casino and Raceway (Orange County) • Trading Cove New York LLC (Sullivan County) Southern Tier • Tioga Downs Racetrack (Tioga County) • Traditions Resort & Casino (Broome County) • Wilmorite Inc. (Seneca County) Albany-Saratoga • Capital Region Gaming (Albany County) • Saratoga Casino and Raceway (Rensselaer County) • Howe Caves Development (Schoharie County) • Pinnacle Entertainment (Rensselaer County) No Announced Locations • Rolling Hills Entertainment • NYS Funding/Och-Ziff Real Estate • Hudson Valley Gaming, LLC • Clairvest

SOLD

Entertainment, MGM Resorts, Penn National Gaming or Boyd Gaming. The company also mentioned some of the non-U.S. Macau operators, such as Melco Crown, SJM or Galaxy. Just two weeks earlier, it was rumored that Crown Casino and its owner James Packer were interested in buying the Cosmopolitan. JUNE 2014 www.ggbmagazine.com

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DATELINE EUROPE june2014

Separate But equal Putin wants casinos in Crimea r

ussia’s President Vladimir Putin wants casinos in the Crimea, and has presented to the State Duma a bill for creating in the breakaway Ukrainian republic a fifth national gambling zone. The legislation is expected to result in the designation of a single resort area similar to the restrictive enclaves the lower house of the parliament established in 2009 when casinos were banned from Russia’s major cities. Plans call for a 100-hectare site, privately financed, somewhere on Crimea’s southern coast. “Casinos and gambling zones will not be scattered over Crimea. Everything will be located in one place,” the republic’s acting president, Sergey Aksyonov, told news agency Itar-Tass. Legalization is supported in the Kremlin as a means to boost Crimea’s foundering economy, which has left the local government heavily in debt and dependent on Russia, which backed its secession from the Ukraine, for subsidies. Opening Sochi to casinos also was considered at one point to bail out investors in the money-losing 2014 Winter Olympics, but the idea did not enjoy Putin’s support and was scrapped. The Crimea zone is expected to create 10,000 jobs, and local authorities say the government has already raised the equivalent of US$1.5 billion toward its

construction. Samoil Binder, a deputy executive director of the Russian Association for the Development of the Gambling Industry, said the development of a resort cluster capable of competing internationally would require $5 billion-$7 billion of investment. “It is necessary to build several five-star hotels on the seashore, to build a recreational infrastructure, including concert halls, sports facilities, restaurants, bars. It will be necessary to organize sports events there, like world championships in Las Vegas,” he said. Russia was home to a thriving gambling industry before the 2009 crackdown. Some 12,000 casinos and machine gaming parlors were running, 80 percent of them in Moscow and St. Petersburg. The market at its peak was generating US$5.5 billion in annual revenues from an estimated 350,000 slot machines and 5,000 table games. The four zones that replaced it have struggled to attract investment. Envisioned by the government as multi-faceted tourist destinations, only one, the Azov City zone in the south, has actively expanded. In 2010, the zone was moved to a more desirable Black Sea location. Last year, it contributed 142 million rubles (US$3.9 million) to the treasury, 121 million rubles of it from gambling. Ironically, a Crimean gaming zone would threaten the Azov City zone the most.

Betting on Barcelona

Getting Tough

Lawrence Ho eyes casino in Spanish city

William Hill closing 109 betting shops

awrence Ho’s Hong Kong-listed Melco International Development has signed a memorandum of understanding with Veremonte España of Spain that could result in Melco managing at least one casino as part of a mixed-use resort complex planned by Veremonte near Barcelona. BCN Dream, as the project is known, is slated to include more than 10,000 hotel rooms, an exhibition and meeting center and up to 5,000 residential units as part of a larger entertainment destination known as BCN World. Recently, Las Vegas Sands abandoned plans to develop a mega-resort in Madrid named EuroVegas, which had the backing of the local government but failed to get the central government to relax the country’s strict anti-smoking law or to guarantee that the rules would not change once construction started. Another Hong Kong-listed company led by Ho, Summit Ascent, recently announced that it would increase its ownership of a casino project in Russia’s Far East near Vladivostok. Ho is co-chairman of Macau casino giant Melco Crown Entertainment, which is expanding in the territory’s Cotai resort district and also is building a resort casino in Manila. Crown Resorts Chairman James Packer is Melco’s other co-chair. Both hold a 33 percent stake in the company.

Global Gaming Business JUNE 2014

.K. bookmaking giant William Hill says it will close more than 100 British betting shops this year in the wake of a tax increase on the industry’s electronic table games and other restrictions aimed at curbing the spread of the controversial devices. The Conservative-led government angered the betting industry by announcing an increase in the tax on e-table revenue to 25 percent from 20 percent in its budget in March, a move that will cost bookmakers around £75 million (US$126 million) a year. New rules being brought in by the government will also boost the powers of municipal councils by extending to them the same power to control the number of bookmaking licenses as they have over the number of bars, off licences or takeaways in a given area. Critics of the machines, which offer automated versions of games such as roulette and have emerged over the last decade as the main source of betting shop revenues, say they are addictive and complain there are too many betting shops in British town centers. The industry contends there is no evidence to support the claims of social ills. William Hill, Britain’s largest bookmaker, owns 2,400 betting shops. The 109 on the chopping block would put 420 jobs at risk. Bookmakers face increased tax bills on two fronts over the coming year, with the government also closing a loophole that has allowed them to base online operations offshore.

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DATELINE TRIBAL june2014

Fold ‘Em

Waiting gamE

Idaho sues tribe to prevent poker

Legislators reject Florida special Seminole session

lorida Governor Rick Scott hinted he was “getting close” to an agreement with the Seminole Tribe regarding portions of its gaming compact that expire next year. But House and Senate leaders rejected his Florida Governor offer to hold a special Rick Scott session in May. In fact, one high-ranking Republican said about a special session, “It’s toast.” Scott apparently could not get enough Senate votes for a special-session agreement, and barely had 30 votes in the House. Senate President Don Gaetz said, “A special session this early would require a pretty Herculean effort, and it’s pretty unlikely at this point. We need more analysis and more time than just a couple of weeks. So far, we’ve had our ear pressed against a closed door with a glass.” Lawmakers believe Scott is close to an agreement with the tribe. He is renegotiating a portion of the current gambling compact, signed by

Eating itsElf?

then-Governor Charlie Crist in 2010, that gave the Seminoles “exclusive” rights to blackjack at seven of its Florida locations in exchange for a minimum of $1 billion over five years. That part of the 2010 deal will expire on August 1, 2015. Scott is considering allowing the Seminoles to open more casinos, including one on a 50-acre property owned by the tribe in Fort Pierce, and add roulette and craps at some of their existing facilities. The tribe also could expand its operations in Broward County and Brighton. Scott is expected to reject destination resort-casinos and deny any expansion of gaming at the state’s parimutuels, but in return Scott is asking for a guarantee of $2.5 billion over seven years—a figure higher than the Seminoles’ current minimum annual requirement of $250 million. Frank Collins, a spokesman for Scott, emphasized that a final deal has not been reached. “There is no deal, and without a deal, there cannot be any decision on how to ratify a deal,” Collins said. A spokesman for the Seminoles said the tribe “is not commenting at this time.” At Scott’s request, legislators put their debate on hold while he began talks with the tribe.

daho Attorney General Lawrence Wasden and Governor C.L. “Butch” Otter have sued in federal court to prevent the Coeur d’Alene Tribe from offering poker at its casino in the northern part of the state. The tribe went Idaho Governor C.L. ahead and opened six ta- “Butch” Otter bles of poker on May 2. It claims it is losing customers to tribal casinos in Washington that offer poker. Idaho is one of the states that bans poker, and claims offering the games would violate the state constitution. The tribe claims that its state tribal gaming compact allows it to offer the game as a “skill” game. Some courts have held that poker is not a gambling game at all, but a game of skill. The tribe would like to offer Omaha and the highly popular Texas hold ‘em at its casino resort, which has operated for about 20 years. However, the lawsuit points out that the Indian Gaming Regulatory Act says tribes may only offer games that are legal within that state.

Cherokee Valley River Casino in North Carolina

Western Cherokee Casino could cannibalize east

onstruction is under way at the Eastern Band of Cherokee Indians’ $110 million Cherokee Valley River Casino in Murphy, North Carolina. Scheduled to open in spring 2015, it’s the tribe’s second partnership with Caesars Entertainment. According to the tribe’s gaming division, Tribal Casino Gaming Enterprise, the new casino is expected to generate $100 million in profits in its first year of operation. At the same time, just an hour east in Jackson County, the tribe’s Harrah’s Cherokee Casino is projected to lose $48 million. However, Cherokee Valley River Casino General Manager Lumpy Lambert said casino officials do not feel the new casino will cannibalize Harrah’s Cherokee. Instead, it will create more gaming options. The new casino is located closer to Atlanta, Chattanooga and Birmingham, he noted. “We have a lot of known Caesars customers in the region that haven’t visited Cherokee. We still have the opportunity to capture untapped visita10

Global Gaming Business JUNE 2014

tion, and being closer to those major markets should help,” Lambert said. Hopes are high that the new casino will drive the economy in far western North Carolina as Harrah’s Cherokee did farther east. A study by the Kenan-Flagler Business School at the University of North Carolina-Chapel Hill done in June 2011 estimated Harrah’s Cherokee contributed $300 million annually to Jackson and Swain counties. The report indicated in 2009 the casino had 1,647 employees, or 5 percent of all employment in the counties, with a payroll of $74.8 million, or 8 percent of all wage and salary disbursements in the counties. The new casino and 300-

room hotel will employ 800-900 people with a payroll of $32 million-$39 million. The new casino also will feature a 108,000square-foot gaming floor with up to 1,200 slot machines and 75 table games. Executive and managerial positions will be filled later this year, Lambert said, and dealers and other live-table staff will be hired in the third quarter to accommodate a 12-week training period. Whiting Turner Contracting Company and Owle Construction LLC are the contractors for the project. The architectural firm Cuningham Group Architecture Inc. also worked on Harrah’s Cherokee Casino.

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DATELINE GLOBAL june2014

Two Bid for Saipan CaSino

The Tinian Dynasty will be threatened by a Saipan casino unless its owner wins the bid.

Owners look to bring Chinese visitors to Northern Marianas

wo Chinese investment groups have submitted applications for the first casino license authorized on Saipan, one of them linked to the new owners of the casino’s prospective rival on the nearby island of Tinian. The office of Governor Eloy Inos identified the two as Hong Kong-based Marianas Stars Entertainment, whose shareholders include Mega Stars Overseas Ltd., which took over the struggling Tinian

Dynasty Hotel & Casino last year, and Best Sunshine International, a subsidiary of Hong Konglisted First Natural Foods Holdings, an investment holding company engaged in processing and trading food products in China and internationally. Both companies wired proof of a US$1 million non-refundable application fee. Both also are required to pay a $30 million casino license fee by

Shut Down in Sri Lanka

Modern Daze Provincial leaders blast OLG over slot plans

Lucrative new casino market short-circuited by administration owing to political and religious opposition, the government of Sri Lanka will not allow casinos inside US$1.3 billion worth of luxury resorts planned for the capital of Colombo. The announcement was made by Economic Development Minister Basil Rajapaksa, brother of President Mahinda Rajapaksa, and comes days after the main opposition United National Party staged a demonstration in Colombo accusing the government of encouraging vice. Casinos are also opposed by political parties controlled by the island nation’s powerful fundamentalist Buddhist clergy. “We voted against these concessions as a warning to the government to correct its course,” Buddhist monk and legislator Athuraliya Rathane said. “We will not allow casinos. That we say very clearly,” Basil Rajapaksa told parliament. “(The promoters) asked, we did not allow, nor will we allow in the future.” He made the statement in conjunction with the government’s approval for the three projects to go ahead, minus casinos, and with 10-year corporate tax breaks, which the UNP also opposes. It is not clear how the news will affect the developments proposed by James Packer’s Crown Resorts and by local hospi-

May 5, bringing Inos closer to his promise to restore the cash-strapped government’s recent 25 percent cut in retirement pensions. “It’s a good day for the commonwealth,” his press secretary Angel Demapan said. The Senate’s pro-casino President Ralph Torres said he was initially hoping that “three or four” investors would participate, “but I am happy that we have at least two,” he told the Saipan Times. “This will lead to economic activities. We can now better address the issues before us.” The winning bidder is required to build at least 2,000 hotel rooms as part of a minimum investment of $2 billion.

President Mahinda Rajapaksa

tality giant John Keells Holdings and Sri Lanka businessman and casino owner Dhammika Petera and his rumored partner, Genting. A casino figures prominently in Packer’s proposed $400 million, 450-room Crown Colombo, a joint venture with the country’s largest casino operator, Ravi Wijeratne, and the subject of “detailed discussions” with the government, according to Melbourne, Australia-based Crown. John Keells, the country’s largest listed company, is proposing a $650 million casino and hotel. Petera’s project is pegged at $300 million. Sri Lanka is home to a handful of small foreigners-only casinos. These were granted recognition by legislation sponsored by the Rajapaksas in 2010 but never formally organized in a regulatory framework. The government had hoped expanding the industry with high-end destination-scale casinos would promote economic development by boosting tourist arrivals and generating badly needed foreign investment for rebuilding the country after decades of civil war with Hindu separatists.

Global Gaming Business JUNE 2014

so-called “modernization” of the Ontario Lottery and Gaming Corp., which included dropping a racetrack subsidy program, has some Canadian government officials fuming. Ontario Ontario opposition Progressive Conservative leader Tim leader Tim Hudak Hudak criticized the “abrupt cancellation” of the racetrack program, which gave $347 million a year from slot machine revenues to horse tracks. “Why would you close down jobs in that sector when the biggest issue is creating jobs?” Hudak asked. “I would park it permanently on the shelf. I don’t believe it’s in the interest of the province to open up 39 new casinos. Instead, I would build on what’s working.” According to CTV News, Toronto Auditor General Bonnie Lysyk has also criticized the change. “OLG included projected profits from those casinos without first confirming that new casinos would be accepted, would be considered, in certain municipalities,” said Lysyk. “In fact, large Ontario cities such as Toronto and Ottawa rejected OLG’s proposals for constructing new casinos.” OLG has failed to find an appetite for downtown casinos in Toronto and Ottawa. By opening new casinos downtown in major cities, OLG said, those downtowns would become tourist destinations for the young and affluent. But the cities weren’t interested. OLG Chairman Philip Olsson said in an open letter to Lysyk that modernization “is a multi-year plan, now in its third year, which, upon completion will deliver approximately $1 billion annually in additional net new profit to the province.” In the end, he said, it would increase the government’s take from gaming from $2 billion a year to $3 billion a year.

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NUTSHELL

“They Caesars Entertainment, in a move designed to avoid $1 billion in interest payments on its suffocating $23 billion debt load, has restructured its debt through a tender offer that creates new notes with longer maturity dates. The deal avoids what was a looming default in 2015 on the interest payments, although it does nothing to reduce the overall debt load, taken on when the company was acquired in 2008 by private equity companies Apollo and TPG. Under the arrangement, Caesars plans to raise $1.75 billion in new debt to pay the 2015 interest. The company also plans to sell 5 percent of its equity to institutional investors at a future date. The New Hampshire House voted last month not to reconsider an earlier vote to kill the two-casino bill. That makes three times within the space of a couple of months that the House has voted not to adopt a bill that would have authorized two casinos with 5,000 slots and 240 gaming tables. One of the world’s largest music festivals will touch down in Las Vegas in May 2015. Rock in Rio is a partnership that includes MGM Resorts International, Cirque du Soleil, and billionaire grocery store owners Ron and Roberto Medina, who founded the concerts in the mid-1980s. MGM will devote 33 acres near Circus Circus and across from the soon-toopen SLS Casino Hotel (formerly the Sahara) to a permanent City of Rock open-air concert venue. The concerts, which are held over four days every two years, could host up to 80,000 people per day, with live music on five different stages. In Florida, Victory Casino Cruises announced it will operate a gambling ship out of Mayport beginning in June, for two cruises per day, seven days per week. The 229-footdeep catamaran carries 640 passengers but may be expanded to hold 840, said Victory Chief Executive Officer Lester Bullock. The new operation will employ 200 people, he said. Cruises will cost $10, and a buffet will be available for $15 per person. The company currently operates a 1,200-passenger gambling ship out of Port Canaveral with two cruises per day. They offer slots, blackjack, roulette and craps. Navajo

Nation Shopping Centers, Inc. has announced plans to break ground this summer on a retail, entertainment, cultural and residential expansion near the Twin Arrows Navajo Casino in Arizona. The expansion, on 70 acres, is dubbed “The Outlook at Glittering Mountain,” and will be developed over the next decade. Estimates are that the first phase of construction will cost up to $15 million. In addition, Navajo Nation Gaming Enterprise has announced that it will offer food grown by local Navajo farmers at its casinos’ restaurants. It announced the partnership with Navajo Agricultural Products Industry last month. According to NNGE CEO Derrick Watchman, “Partnering with the Navajo Agricultural Products Industry and its Navajo Pride brand products is just one component of NNGE’s larger commitment to buy Navajo and support hardworking Navajos across the reservation.” Official data shows 18 hotels were under construction in Macau at the end of March— 10 on the peninsula, five on the Cotai resort strip, two on Taipa and one on Colane. The Land, Public Works and Transport Bureau also is reviewing plans for another 25 hotels. The 43 developments combined will add up to 25,600 hotel rooms to the city’s stock. Pressure is mounting on Massachusetts to change the way it taxes gambling winnings if it wants to attract business to the state’s three casino resorts and slots parlor, when they are built. Both MGM Resorts, which wants to build in Springfield, and Steve Wynn, who has a proposal for Everett, argue that the current provision that requires collecting 5 percent withholding from winnings greater than $600 is counterproductive. This threshold is much lower than just about any other state that allows gaming, they say, which all use the federal withholding standards. To do otherwise will discourage casual visitors as well as regular players, they say. Both call the current rule “wholly impractical” and “functionally impossible,” and an administrative burden that will force play to stop with the winner filling out a tax form every time he wins more than $600.

CALENDAR June 12-13: Social Casino Summit USA & Online Gambling Summit USA, Bellagio, Las Vegas. Organized by Bullet Business. For more information, visit bulletbusiness.com.

July 14-16: GiGSE (Global iGaming Summit & Expo) 2014, Hyatt Regency, San Francisco. Produced by Clarion Gaming. For more information, visit gigse.com.

June 23-25: Canadian Gaming Summit, Vancouver Convention Center, Vancouver, British Columbia. Organized by the Canadian Gaming Association. For more information, visit canadiangamingsummit.com.

August 11-13: OIGA Conference & Trade Show 2014, Cox Centre, Oklahoma City. Produced by the Oklahoma Indian Gaming Association. For more information, visit oiga.org.

June 25-26: iGaming Super Show & Amsterdam Affiliate Conference, Amsterdam RAI. For more information, visit igamingsupershow.com.

August 12-14: Australasian Gaming Expo 2014, Sydney Exhibition Centre, Glebe Island. Produced by Gaming Technologies Association. For more information, visit austgamingexpo.com.

Said It”

“I see what exploitation of the poor and vulnerable people does to a family. I don’t want a casino to be put on every kitchen table or iPad. I know I’m a Republican and I’m not supposed to be socially sensitive, but I am socially sensitive.” —Sheldon Adelson, Las Vegas Sands chairman, speaking to students at the University of Nevada, Las Vegas on his push to ban online gambling

“Tribal gaming has generated some of the most successful gaming models in the world, with strong regulations and tough controls. As a result, California has become a leader in the gaming market. Only a bill that replicates those standards will succeed in California.” —Robert Smith, chairman of the Pala tribe in Southern California, commenting on what is needed for an online poker bill to be passed by the legislature

“It’s like a pillow fight in a dark room now.” —Massachusetts Gaming Commissioner James McHugh, reacting to the uncertain nature of the process of awarding casino licenses in the Bay State

“We had incorporated way too many clicks in this process, and so people who had played online poker in the past never had to go through this detailed process filled with all these extra clicks. Some people are taking a wait-and-see attitude about playing online games.” —Tom Breitling of Ultimate Poker at the iGaming North America conference in Las Vegas on some of the sign-up problems online gamblers have seen in New Jersey

“I’m not a casino operator. I know who I am and I know who I’m not.” —David Flaum, Rochester, New York developer, who has not yet named his gaming partner for a proposed Albany casino

“I think that just might be a high hill to climb this year.” —Delaware Senate Minority Whip Greg Lavelle, commenting that general budget woes and low revenue projections could kill legislation designed to ease the tax burden on the state’s struggling racinos

JUNE 2014 www.ggbmagazine.com

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AMERICAN GAMING ASSOCIATION

New Talent, New Mission AGA team will champion gaming By Geoff Freeman, President & CEO, American Gaming Association

he AGA continues to grow and add exceptional talent to deliver against our strategic plan. We have recently hired three team members who bring expertise in membership engagement, ally development and media outreach. Along with our five hires in January, these new additions complete phase one of building AGA’s new team. Our team will serve as unapologetic champions of gaming with the mission to facilitate industry growth, to prevent harm and to connect and inform our industry. • Chief Operating Officer Ron Rosenbaum has more than 20 years of experience in associations that excel at member services. Ron will drive member engagement and retention as well as lead and oversee the AGA’s conferences, events and programs. • Director of Ally Development Brian Cohen previously worked for the Motion Picture Association of America and has held other various roles with federal agencies in D.C. Brian is an expert in advocacy and strategic outreach—he will identify and manage a network of gaming champions to support the industry’s goals at the federal, state and local levels. • Director of Media Development and Relations Chris Moyer has extensive political campaign and Capitol Hill communications experience. He will support AGA communications efforts through engagement with the media and other stakeholders. FACILITATE GAMING’S GROWTH Our industry has a great story to tell. We revitalize struggling communities, provide numerous economic benefits and generate crucial tax revenue that funds schools and other essential public services. In holding on-the-ground events in communities and more aggressively telling the positive story of the industry to media and policymakers, our new team members will unify the industry’s voice and passionately promote the positive impacts of gaming to help facilitate industry growth. 14

Global Gaming Business JUNE 2014

Our new team will deploy robust communications to promote regulated gaming and urge lawmakers to enact policies that combat illegal operators. AGA’s new team will work with local community groups who depend upon our industry—such as educators, city managers, mayors and more—to promote the benefits they receive from regulated gaming. The more voices supporting our industry, the more effective we will be in shaping policy in a way that supports, rather than harms, our industry.

“

Recruiting federal lawmakers to serve as champions of gaming is a critical aspect for protecting the gaming industry’s interests. AGA will actively engage lawmakers to create a broader bench of support for gaming in Congress.

”

PROTECTING THE INDUSTRY’S INTERESTS Recruiting federal lawmakers to serve as champions of gaming is a critical aspect for protecting the gaming industry’s interests. AGA will actively engage lawmakers to create a broader bench of support for gaming in Congress. Gaming is widespread throughout the country, and our congressional champions must reflect that footprint rather than be limited to a few clusters where gaming originated. While federal lawmakers can considerably affect gaming, many of the everyday impacts on gaming are formed at the state and local level. With that in mind, AGA will engage to eliminate illegal gambling operators at all levels. Few industries are more heavily regulated than gaming. Illegal gambling operators do not uphold

the same regulatory safeguards for consumers— nor do they provide the same sort of economic development and tax revenues that regulated operators provide local communities. In conjunction with stakeholders, third-party allies and law enforcement, AGA will lead the charge to eliminate bad actors, which skirt the rules that maintain consumer protections and integrity for gaming. CONNECT AND INFORM GAMING PROFESSIONALS AGA strives to serve as an invaluable resource to industry professionals. Our programs, events and initiatives provide gaming industry professionals with tools to remain high-performing and forward-looking. Toward this end, AGA will look for opportunities to continually elevate the premier gaming industry event, G2E. Through innovative conference programming and development of new avenues to facilitate industry networking at G2E, we will deliver increased value to an already well-established, successful industry event. JOIN AGA’S EFFORTS Your engagement is critical to ensuring the protection of the gaming industry’s interests. Please join us as we advocate for gaming by: • Facilitating the industry’s growth by shaping the perceptions of policymakers, opinion elites and stakeholders. • Preventing harm to our industry, which includes recruiting congressional champions and eliminating bad actors that don’t play by the same rules as legitimate, regulated gaming. • Connecting and informing our industry by elevating G2E to maximize value and developing valuable initiatives centered around the needs of gaming professionals. To stay up to date with our efforts, please to contact our team at connect@americangaming.org. Your feedback and innovative ideas are appreciated and encouraged. Together, we will elevate the gaming industry to all-new heights.

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FANTINI’S FINANCE

International Vision Large global companies are making moves to bolster their values

s the casino industry continues its evolution, large international operators dominate the one-time domain of private owners and riverboats increasingly. And, while there are still plenty of privately owned enterprises and big single-market companies, such as Macau casino operators SJM and Galaxy, the names Las Vegas Sands, Genting—in its several iterations—Wynn and MGM Resorts are most often mentioned when huge international projects are discussed. By market value and most other measures, Las Vegas Sands is by far the largest company. Its stock is worth more than $60 billion, several times that of Wynn, MGM and the combined Gentings of Singapore, Hong Kong and Malaysia. Others might join the club. Melco Crown has a market value of around $20 billion. Its largest shareholders, Melco International and Crown Resorts, add more heft. And MPEL is the first of the Hong Kong-listed Macau operators to expand outside the enclave, setting up Melco Crown Philippines for its part of City of Dreams Manila. In effect, the casino industry is reaching the maturation of other industries, such as automobiles, hotels, media and consumer electronics, where giants compete globally. That competition will be in full view if Japan legalizes casinos along the lines expected—one mega-resort each in Tokyo and Osaka, plus regional casinos. Already, CEOs Sheldon Adelson of Las Vegas Sands, Steve Wynn of Wynn Resorts and Lawrence Ho of Melco Crown have said they are prepared to invest more than $5 billion in Japanese casinos. Adelson suggests maybe even $10 billion. The international competition has also reached the U.S., where Genting is building multibillion-dollar Resorts World Las Vegas, is angling for a full casino in New York where it will have a huge slots casino, and is ready to finance Mashpee Wampanoag casino ambitions in Massachusetts. Genting was the original financier of Foxwoods back in the 1990s when no real bank would consider Indian gaming. So, what are the investment implications? 16

Global Gaming Business JUNE 2014

By Frank Fantini

For one, these stocks are up against the law of big numbers. Wynn can grow nearly 20 times from its IPO price of $11, but it isn’t likely to grow 20 times from $200. And, yet, such big corporations offer advantages that faster-growing small fry can’t. In most industries, that includes downside protection. Market leaders have safety in things like economies of scale, geographic diversity and product diversity. If a Johnson & Johnson product flubs, the company has hundreds of others to keep revenues flowing in. And if one country or market is in recession, there are growth areas to make up for it. Those advantages aren’t quite there in gaming, yet. Wynn, for example, operates just in Las Vegas, but mostly in Macau. Las Vegas Sands has some diversification in Singapore, its retail malls and convention businesses. MGM is the broadest-based of the giants, heavily invested in Las Vegas, but with casinos throughout the U.S. and a Macau operation. MGM promises to diversify further as it develops a major casino outside Washington, D.C., and likely in Massachusetts. And, while LVS and WYNN are focusing on Tokyo, MGM appears likely to go for a regional casino in Japan. The company is also in the early stages of entering the non-gaming hotel business internationally. Another advantage of big international corporations is paying dividends while growing steadily. Famed Wharton professor Jeremy Siegel once tracked the performance of stocks in the S&P 500, going back decades. He found that the best long-term returns were not in the hot growth stocks, but in venerable giants like Standard Oil (now Exxon), where steady growth combined with reinvested dividends. However, the gaming giants, with increasingly generous dividends, aren’t quite there yet, either. That is because one of the biggest differences Siegel found in long-term wealth creation

was in the current stock price. A Standard Oil could be bought at 10 times earnings, but the hot growth stock cost 20 or 30 times. The gaming giants are still priced for growth, with companies like Wynn at 30 times trailing earnings. But dividends are a big part of their return. Tom Marsico of Marsico Capital once pointed out to Steve Wynn on an investor conference call that WYNN’s dividends have been greater than the original IPO price. “You’re paying me to own the stock,” he told Wynn. Adelson likes his company’s dividends. His motto, that Adelson said on LVS’ first quarter investor call: “Pay dividends.” And LVS stock, selling at 17 times projected earnings, isn’t all that far from the big over-time winners Siegel discusses in his famous book, Stocks For The Long Run. Siegel also found that buying an S&P 500 index fund went a long way towards taking advantage of the historical trends. A gaming alternative might be a basket of the international dividend payers—Wynn, Las Vegas Sands, Melco Crown. Another difference is that casinos operate in a privileged industry, thus subject to political whims. In Macau, for example, there is concern over financial terms the government will extract from operators when it comes time to renew gaming concessions, and, at least theoretically, whether all concessions will be renewed. So, the big-cap casino operators share some attributes of internationals in other industries, but they still have major differences of concentration of business, high stock valuations and vulnerability to government policy and politics. Of course, investors in other industries might still envy the one quality the big gamers have in common—growth potential. 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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REGULATION

My Trip to Atlantic City How New Jersey has been able to manage the new industry of iGaming

By Richard Schuetz

n September 2011, it was my honor to accept an appointment by California Governor Edmond G. Brown, Jr. to the California Gambling Control Commission. Shortly thereafter, the governor’s senior adviser on gambling requested my presence at a meeting in the capitol building. I was accompanied to this meeting by the commission’s chairwoman, Stephanie Shimazu, and our executive director, Tina Littleton. The aide to the governor instructed the three of us that the commission needed to develop a fluency in the topic of iGaming. Immediately after this meeting, Chairwoman Shimazu called a vote to decide which of the three of us should be assigned the responsibility for this task, and my vote was for anybody but me. In spite of my actively campaigning for the anybody-but-me candidate, I won by a vote of 2 to 1, brought on by the two female electors voting as a bloc. Once elected, I took this new assignment and responsibility quite seriously. I immediately set out on a strategic plan that involved developing a network of experts within the iGaming space that would actually accept and return my calls, developing a library of articles and books relevant to the topic, and developing a database of existing statutes, bills and regulations. I also began attending, and accepting invitations to participate in, that burgeoning industry of iGaming conferences and trade shows that were being offered around the globe. It was at one of theses conferences, held in Philadelphia in November 2013, where I met Dave Rebuck, director of the New Jersey Division of Gaming Enforcement. Dave and I were on a panel together, and the entire panel was to meet earlier in the day to discuss how we might best organize our comments. I was materially late to this session, and when I arrived, essentially everyone was gone. Dave was just leaving the room, and I introduced myself and he stopped what he was doing, sat down, and just

started visiting with me. I immediately liked Dave, for he possessed an approachability that was welcoming, plus he communicated very clearly and directly. Following this session in Philadelphia, I worked to stay in touch with Dave, and we exchanged emails and phone calls. Early in 2014, I accepted an invitation to participate in an iGaming conference in Atlantic City. The producers demonstrated the curious judgment of using me as one of the featured speakers in their marketing efforts, even using my picture as one of those offered on the cover of the brochure. Shortly thereafter, I received an email from a

‘‘

aways from what I learned over the next three hours were: • Dave is surrounded by a group of people who are incredibly intelligent, skilled, and well-trained. • This is a group of people that had worked long and smart to meet the requirements of launching an iGaming industry just nine months after the enabling legislation was signed. • This is a group of people that works very well together and demonstrates all of the beneficial attributes of the concept of team. I think this is Dave’s greatest accomplishment. • The New Jersey iGaming experiment, while being challenged by many issues related to newness, and somewhat disappointing in its revenue streams, has been able to meet the regulatory tests of eliminating underage participation and out-ofmarket participation. Furthermore, the fact that the systems involved account wagering made these systems somewhat implausible avenues to launder money. In short, from a regulatory standpoint, the systems did what they were designed to do, and did it very well. Prior to the launch of iGaming in the U.S., there was a lot of speculation as to the ability of the regulators to appropriately monitor and control these systems. Some suggested that they would be subject to a whole variety of social ills, involving such issues as underage participation, difficulty in ring-fencing, and inappropriate financial transactions. Well, the proof of the pudding is in the tasting, and Dave and his team in New Jersey have clearly demonstrated that these concerns were misplaced. There was actually one more takeaway from my visit with Dave and his team, and that was how proud they all were of what they had accomplished. They should be.

The New Jersey iGaming experiment, while being challenged by many issues related to newness, and somewhat disappointing in its revenue streams, has been able to meet the regulatory tests of eliminating underage participation and out-of-market participation.

Global Gaming Business JUNE 2014

member of the DGE staff that acknowledged that Dave had noticed that I would be attending this conference, and he was offering to open up their offices to me during that time for a tour to explain their approach to iGaming regulation. I RSVP’d immediately in the affirmative. I arrived at the DGE offices and was coincidentally met by Mario Galea, of Malta, who is the external consultant to the DGE on iGaming matters. I had met Mario in a number of different locations, including my own office, and he was always insightful. I also met up with my friend and colleague Susan Hensel, a director at the Pennsylvania Gaming Control Board, who had just completed two terms as president of the International Association of Gaming Regulators. Susan had been invited by Dave to join in the tour. The three of us climbed into the elevator and were whisked up to the DGE offices. As we arrived on the fourth floor, Dave and the majority of his senior staff met us. In making a potentially long story somewhat shorter, the take-

’’

Richard Schuetz is a member of the California Gambling Control Commission. The opinions within this article are his, and do not necessarily reflect those of the CGCC or any other entity within the state of California.

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The Virtual

Frontier

Despite questionable results in three states with legal online betting, high hopes remain for iGaming By Marjorie Preston

ince Nevada legalized real-money online poker in February 2013, land-based casino operators have been debating the effects, pro and con, of what Governor Brian Sandoval called “the next frontier” of gaming: the internet. Now online and legal in three jurisdictions including Nevada, New Jersey and Delaware, internet gaming lets gamblers play whenever they want, at the kitchen table or in the man cave, in their PJs or in the altogether, as long as they stay inside state lines.

Elusive Jackpot So far, online gaming has not been the windfall the states hoped for. Within weeks of its November 2013 launch, New Jersey generated $8.4 million in online gaming revenues. That’s far short of the amount it would need to reach Governor Chris Christie’s forecast of $1.2 billion (including $180 million in taxes) by the end of fiscal 2013. While revenues in the state are on the rise—they spiked to $9.5 million in January, $10.5 million in February, and $11.9 million in March—projections for Year One have been drastically revised downward. New Jersey now predicts it will take in $35 million in taxes from online bettors by June 30. Compared to New Jersey, the numbers in Delaware have been downright anemic; online gaming in the First State brought in just $253,000 in November and December, and $145,200 in January. The numbers were slightly up in February, but online poker dropped 16 percent that month. Time magazine called the outcome “pathetic.” Eilers Gaming Research analyst Adam Krejcik told investors the results were “nothing short of a disaster.” As more states legalize online gaming and the player pool expands, those figures will likely increase. Nevada and Delaware have made the first step in that direction, signing the nation’s first interstate gaming agreement. But the games have yet to go live. Nevada’s figures have likewise been underwhelming. Its online poker rooms have generated $8.52 million during the first 10 months of operations. 20

Global Gaming Business JUNE 2014

Growing Pains “The doors haven’t been blown off” by online gaming, says Larry DeGaris, professor of marketing at the University of Indianapolis and an expert in internet culture and sports betting. But that doesn’t mean the idea is a dud. “Expectations were higher that this was going to be a big boon to the industry, and there hasn’t been a radical shift,” acknowledges DeGaris. “I think a lot of that is a function of having to build a new audience for the digital format, and even bringing the younger people into gaming in general. It’s still early.” “There’s always a progression,” agrees Ethan Tower, protocol director for the Gaming Standards Association. “It’s taken 20 years for almost every state in the country to legalize some form of gambling. It will be matter of time for more consumers to demand (online gaming), for politicians and regulators to respond to that, and then for the operations to actually get under way.”

Get Off of My Cloud There are plenty of reasons iGaming has stumbled out of the gate. Some U.S. banks have put a kink in the system by refusing to process payments for internet gambling. Unregulated sites are still in play and commanding player loyalty. And many players may be slow to return to legal virtual gaming after being booted off the cloud casino a few years back. On April 15, 2011, the gaming industry’s “Black Friday,” the FBI cracked down on online poker, not only shutting down offshore sites but freezing millions of dollars in U.S. players’ funds. It took more than a year for those players to cash out. “It will take some time for players to re-adopt real-money online gaming as a form of entertainment,” says Dana Takrudtong, vice president of sales for GameAccount Network North America. The revenues generated by social casinos show “a clear desire by players” for high-quality online gaming. The market will grow “as players get more

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“By getting players to open their wallets today to game online for fun, operators may be able to influence how quickly they reach the ‘tipping point’ of player acceptance of real-money gaming when it’s introduced in their respective jurisdictions.” —Dana Takrudtong, Vice President of Sales for GameAccount Network North America

comfortable with the fact that the business isn’t going to be turned off,” Takrudtong says. “There will be a time where they’re comfortable re-engaging online.” Meanwhile, operators who get into the space early “through the deployment of monetized social casinos, white-labeled or customized for their brand, will have a leg up when real-money gaming is introduced.” Despite the bumpy rollout, tepid revenues, and South Carolina Senator Lindsey Graham’s new push for a ban on online betting (at the behest of antionline gaming mogul Sheldon Adelson of Las Vegas Sands), nine states in the U.S. have online gaming legislation in the works. Pennsylvania is teetering on the brink, but California could be quicker to tumble. Some analysts say the state’s powerful tribal gaming industry could push through an internet poker bill by summer. And back in New Jersey, state Treasurer Andrew Sidamon-Eristoff says he’s not discouraged by the nascent industry’s weak numbers. “Clearly, this hasn’t met our expectations for the first fiscal year,” he recently said. “But we’re pretty bullish on this in the medium-to-long term.”

Buying In Instant jackpot or not, online gaming may have some operators feeling jittery. All they have to do is look at how online retail has affected bricks-and-mortar operations, and how online communications have decimated centuries-old industries, from print publishing to the daily mail. While they talk about the promise of online play, some may secretly be concerned that it will ultimately hijack land-based operations. Could the casino of today (heaven forbid) become the mall of tomorrow?

Kevin Mullally, vice president of government relations and general counsel at Gaming Laboratories International, suggests those fears may be groundless. From a purely technical standpoint, he says, online is simply another distribution channel for the games we already play. “When Zappos went online and started selling shoes and Amazon created an online department store, it was simply the modernization of a delivery mechanism for an activity we already had,” he says. “When banks began allowing customers to use their phones to take a picture of a check in order to deposit it, no one suggested an expansion of the banking industry. It was simply the modernization of the delivery mechanism for an activity that already existed. Online gaming is no different. “So you have a choice: you can compete and try to do it better or well enough to also profit from the efficiencies of the online marketplace, or because it’s a little different from a retail product and requires an intricate system for compliance and licensing, policymakers can make the decision to tie online licenses to land-based investments.” Of course, the latter is already true in the three legal jurisdictions, and other states will likely follow that framework as iGaming becomes more prevalent. If they do, iGaming “could be a tremendous asset to land-based casinos, and protect those capital investments,” says Mullally.

This Is How We Do It For the best-case scenario, look to a mature jurisdiction such as the United Kingdom, where mobile betting more than doubled in 2013, and the market could reach revenues of £2.5 billion this year. The bonanza is attributed to a rise in smart-phone and tablet use, and full buy-in among gaming operators, who have made a major investment in the mobile side since the industry was deregulated, including a massive advertising push. According to a November report in the Guardian, the number of gaming commercials on British TV―including sports betting, online casinos and poker―has grown from 234,000 a year in 2005 to nearly 1.4 million in 2013. That’s an increase of nearly 600 percent. Gambling ads now account for more than 4 percent of all television advertising, the report noted. Of course, mobile connections allow the casino to be constantly accessible. “You also have ability to engage more often and more seamlessly to players versus direct mail or billboard or traditional advertising,” says Bob Hays, vice president of North American operations for Williams Interactive. “You’re doing it in real time, in the fashion that people now choose to engage.”

Add, Subtract or Divide? Done right, says Hays, online has the potential to add to the player base, not subtract players from existing casino operations or simply shift them from one JUNE 2014 www.ggbmagazine.com

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“In many ways this is a much safer, better product than any land-based environment, because it gives many more tools for compliance.” —Kevin Mullally, Vice President of Government Relations and General Counsel at Gaming Laboratories International

sector to another. “It’s not just the same players at land-based going online, though a high percentage of them do. It expands the option to those who don’t traditionally visit a casino at all, or don’t visit often. By introducing their brands online with compelling content, operators have the option to acquire additional players that may not traditionally visit land-based casinos.” Operators may also expect players to migrate from the virtual casino to the bricks-and-mortar property, and vice versa. According to WMS’ Active Gambler Profile, “a semi-regular research report measuring the evolving tastes and preferences of North American casino players,” 54 percent of North American casino players played social games online in 2010; in 2013, that number surpassed 72 percent. The company’s research also showed that: • Social casino players are also land-based casino players. • 25 percent of social casino players have visited casinos in the past 30 days. • 45 percent of social casino players have visited casinos in the past 90 days. • 82 percent of social casino players visited a casino in the past year. • One-third of social casino slot players visit a land-based casino at least once a week. In addition, the report states, social casino players are multi-generational, with 52 percent under 40 years old, and 68 percent under 50. “Americans across multiple demographics spend hours a day online, meaning that I don’t believe online casinos are a pastime of only the Technorati,” adds Takrudtong. “For example, the explosion of social casinos and other social games funded by micro-transactions in recent years has been driven by the play of females in their mid-50s and males in their upper 40s. Yes, the online gambler is younger than the average land-based player, but not by generations.” That said, DeGaris says there is a huge untapped pool of “young guys under 35” who would be a natural fit for the virtual casino. “They grew up with video games and Xbox, playing ‘Call to Duty,’ and it’s not a big switch to play online poker. But a lot of those young guys are not in the pipeline yet.” And while the online gamer may have been stereotyped as a solitary 20something, alone in his parent’s basement and gaping at a screen, these players also welcome community, and are building communities that will grow as the industry grows. “Community will always be important, online and offline,” Takrudtong says. Smart iGaming platforms “provide casino operators tools, from game themes to chat portals, for increased engagement with their players, essentially extending the land-based community to their online real estate.”

Rules of Engagement So how do stateside, land-based operators in pre-legal states find and engage online gaming customers, entice them to play socially, keep them playing, and reap the benefits as online legal games become more widespread? • Get in the Game Early. “Every time an operator delivers a valuable ex22

Global Gaming Business JUNE 2014

perience to a player, the operator builds on that player’s trust with the brand,” says Takrudtong. “By getting players to open their wallets today to game online for fun, operators may be able to influence how quickly they reach the ‘tipping point’ of player acceptance of real-money gaming when it’s introduced in their respective jurisdictions.” • Keep in Touch. “The overall growth of mobile adoption and social game play affords land-based operators a very dynamic way to stay front-ofmind with their players, providing these desired mobile social gaming experiences to players under their brand,” says Hays. Online components allow increased engagement with players, “up to four times a day,” he adds. “If a player is logged on 20 minutes per session, that gives you 80 minutes more a day to engage with the player than you would have had otherwise.” Williams’ Play4Fun Network, for example, was expressly designed for landbased operators to “build an engaged online community in jurisdictions where online wagering is not yet allowed,” and keep players visiting via desktop, tablet and mobile devices. • Keep It Simple. “Online channels should be easy to navigate, provide a gaming opportunity, and drive revenues across the enterprise via realtime marketing and promotional offers,” says Takrudtong. “With a limited number of operations effectively providing all three online pillars, there’s ample opportunity for those operators who do engage to reap the benefits of being an early adopter to the space for years to come.” Operators should take steps today to ensure they have “a meaningful presence across the web, improving their desktop and mobile real estate to ensure the experience with the brand online delivers the same value as the bricks-and-mortar property.” • Emphasize the Safe Bet. With regulation comes greater assurance among the public and the powers-that-be that online gaming will not create a nation of compulsive gamblers. “It’s already being demonstrated that many of the boogie men that were foreshadowed by some of the critics have not really emerged,” says Mullally. “In many ways this is a much safer, better product than any land-based environment, because it gives regulators and operators many more tools for compliance. It also gives gamblers tools to manage their behavior and experience that don’t exist in the land-based world.” • Support Standardization. Establishing standards for online gaming will “drive down costs, improve efficiencies, and make it easier to integrate platforms, bring products to market more quickly, and get into new markets faster,” says the GSA’s Tower. “One of the real differences with online now is that most of the systems are constructed as monolithic systems; they’re not broken down into independently testable components. That’s one of the biggest hurdles in online gaming for the manufacturer, to break down the system into independently testable and verifiable modules so they don’t have to go through huge end-to-end tests on online gaming platforms any time they want to do an upgrade.”

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“The internet cannot be forced back into the bottle, nor can market demand. Before a single state authorized legal online gaming, Americans spent nearly $3 billion (on mobile gaming).” —Geoff Freeman, President & CEO, American Gaming Association

The Final Frontier In December, Geoff Freeman, president and CEO of the American Gaming Association, appealed to Congress to stop any attempts to curtail legal online gaming. “The internet cannot be forced back into the bottle, nor can market demand,” Freeman said. In 2012, he added, “before a single state authorized legal online gaming, Americans spent nearly $3 billion” on mobile gaming. U.S.-based players constituted about one-tenth of a $33 billion global industry, enriching operators of illegal, unregulated offshore sites instead of bringing the jobs and revenue home, Freeman said. “You need to legalize it so you can regulate it,” says DeGaris. “Then you can catch the cheats.” If the history of gaming is any indication, legalization will eventually accelerate and the player base will multiply. Then the revenues will follow suit. “I think to a certain extent we’ve seen this movie before,” says Mullally. “Look at the lottery. Originally you had a few lotteries in the Northeast that existed for years, and gradually there was a domino effect that picked up speed to the point where almost every state now has a lottery. You saw the same phenomenon with regional gambling or riverboat gambling.” The pace of online gaming for cash will pick up “once it has been more widely passed and rolled out and implemented,” says Mullally. Now’s the time to get ready. “Nearly two decades ago, the introduction of e-commerce was terrifying to both small and established brickand-mortar retailers,” says Takrudtong. “The best of businesses embraced emerging technologies to better the brand experience and drive incremental revenues. Expanding into online gaming is the next evolutionary phase, and one that deeply aligns with the heart of our industry: providing entertaining game content in a well-designed environment available to players 24/7.” “It’s a wide-open market out there for online gaming,” says Tower. “You’ve got to put together a product, get it out in front of the consumer and try to sell it. In doing that, you may open up a new market for yourself.”

Global Gaming Business JUNE 2014

Facing the Future Q&A with Steve Carlin, Global Head of Strategy, Gaming, Facebook Global Gaming Business: How are casinos using social media such as Facebook to market to the new crop of social gamers as well as existing casino patrons? Steve Carlin: Traditional marketing objectives

like reach and targeting work incredibly well on Facebook, which has more than 1.28 billion people, 800 million people on mobile, and vastly rich data that can be used in a privacy-safe way for effective targeting. Every day I talk with real-money gaming marketers who are seeing remarkable results that both complement and rival those of other mass media. People spend more time online than any other point in history, and the majority of that time is spent on mobile. When people are on their phones, they’re on Facebook, scrolling through their News Feed, discovering what matters to them; in fact, on average, people spend 35 minutes a day looking at the Facebook News Feed. So when you think about the amount of time people spend on Facebook, combined with its rich data from authentic profiles, the gaming community has tremendous potential to increase the efficacy and effectiveness of their marketing. This is true whether you’re trying to acquire customers, retain them, monetize a game, build your brand, or you’re a land-based casino that wants customers to be able to continue the casino experience in a fun, online environment. Does the marketing message differ for young social gamers versus longtime casino patrons?

Marketing to 22-year-old social gamers or to 40-year-old female slot players is all about knowing your audience and speaking in ways that matter to them. What’s amazing is that utilizing vast amounts of authentic data empowers marketers to move beyond blunt demographics and more towards perfectly timed and tailored messages. Facebook has worked hard to make this a reality for this industry. Does Instagram factor into this, or other FB-owned technologies?

Facebook’s News Feed is the optimum place for this because it’s where so many people spend so much time. While ads in News Feed have proven extremely effective in terms of targeting current and repeat customers, marketers can also reach a wealth of new and potential gamers based on their interest in similar games, prior game involvement, etc. As an example, a land-based casino can use our custom-audiences tool, which creates a targeting group based on an existing customer database, to market their social casino games and let their customers continue their casino experience, even when they’re not in Las Vegas. Good marketing, whether on Facebook, TV, out of home, radio or print, has always been about reaching the right people with the right message at the right time. As we continue to improve News Feed’s capabilities, we look forward to continuing to work with the gaming community to advance their goals, reach new gamers, and help spawn the type of innovation that has always driven this industry.

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WILL

MEAN

How the growth of gaming over the past decades has impacted the health of the industry

By David G. Schwartz

nce, the United States was an undeniably underserved casino gambling market. Back in the Jurassic era of gaming—the early 1970s—Nevada was the only place Americans could legally bet on casino games. When Atlantic City’s first casino, Resorts International, opened in May 1978, the results were predictable: lines around the block, as pent-up demand was suddenly met. Within five years, Atlantic City casinos were out-earning their counterparts on the Las Vegas Strip. The next 20 years saw casino gambling expand throughout the United States. Back in the 1970s, some were fearful that the availability of gambling elsewhere would ruin the appeal of Las Vegas. That didn’t happen, as Las Vegas gaming win soared in the 1990s. But since then, further expansion has put pressure on “mature” gaming markets like Atlantic City, Mississippi and Delaware, which have seen revenues decline. This raises the question of whether further expansion will do more harm than good. To get a better appreciation of where we are heading, I compiled a set of data with total annual casino and racino gaming revenues for all 23 states, and slot data for Connecticut’s two tribal casinos. West The results? Since 2001, the Northeast

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has increased its overall share of the nation’s gaming win, rising from 24 percent to 30 percent. The South and Midwest have remained relatively constant, with some weakening in the South despite the addition of Florida racinos to the mix. And the West, thanks to Nevada, still is dominant, though the Northeast is catching up.

West This region continues to be dominated by Nevada. With Kansas and Okla-

Regional Gaming Win, 2001-2013

Midwest

South

Northeast

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Midwest Revenue 2001 vs. 2013

Overall, since 2011, Midwest gaming revenues have increased by 11 percent— the best record of any quadrant since then. That large increase speaks to the underlying strength of the Midwest region as a gaming market, and to the continued health of the national gaming industry.

2001

$750,000

$1,500,000

$2,250,000

2013

homa as the only new commercial entrants to the region since 2001, there simply hasn’t been much competition for Nevada—among commercial casinos, at least. Of course, the growth of tribal gaming in California, Arizona, Oregon, Washington and Idaho has had a great impact on casinos in Nevada. While the Strip has remained resilient, the new competition has undeniably hurt several markets in Nevada, particularly Reno, Lake Tahoe, Laughlin, and other areas chiefly reliant on drive-in traffic from previously underserved states. It appears that Nevada has weathered the brunt of the damage caused by the expansion of tribal gaming; the recovery of Las Vegas has stabilized the rest of the state. Though it is not seeing the rapid expansion of gambling that the Northeast is, it is still the largest generator of commercial casino revenue.

Midwest There have been two stories in the Midwest: the decline of Illinois, once neck-and-neck with Indiana as the region’s largest casino market, and the debut of Ohio. In 2001, Illinois had a 32 percent share of the Midwest, just behind Indiana’s 33 percent. A 2003 tax increase started the slide, and the 2008 smoking ban greatly exacerbated it. In 2013, Indiana had 31 percent of the Midwest market; Illinois’ share had fallen to less than 20 percent of the market. On the other side of the equation, Ohio has not had as much of a disruptive effect as might have been thought. In 2013, the state’s fledgling casino industry generated over $1 billion in revenues. Since 2011, the last year before Ohio casinos, Michigan revenues have declined by a total $400 million—a hit, to be sure, but one that is more than canceled out by the $1 billion in revenue, much of which seems to be “new” money. Overall, since 2011, Midwest gaming revenues have increased by 11 percent—the best record of any quadrant since then. That large increase speaks to the underlying strength of the Hard Rock Rocksino Northfield Midwest region as a gaming marPark is Ohio’s fourth racino. ket, and to the continued health of the national gaming industry.

South The South—Mississippi, Louisiana, Missouri and Florida—has seen tremendous changes since 2001. At the start of the period, Mississippi was the king of the region, taking home nearly half of all commercial casino revenue in the South. That share has dropped gradually since then, evidence of

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Southern Revenue 2001 vs. 2013 Casinos on the Gulf Coast

$3,000,000

$2,225,000

$1,500,000

$750,000

2013

2001 serious problems with Mississippi’s industry—problems exacerbated by the destruction Hurricane Katrina wrought on the Gulf Coast in 2005, but problems predating the storm. Mississippi’s gaming revenue has fallen 21 percent since 2001—the second-worst record of any state with commercial casinos. But how much of this drop has been to new competition from other states? New competition of a sort came from Missouri, which in 2009 eliminated its $500 buy-in limit, and Florida racinos—along with full-service casinos operated by the Seminole Tribe in Florida—have likely lured Sunshine State gamblers. At the same time, both Missouri and Louisiana have strengthened their positions. In 2011, Louisiana’s gaming win passed Mississippi. As late as 2009, Mississippi was the third-leading commercial casino revenue state in the nation (behind Nevada and New Jersey). By 2013, it had fallen to sixth place. While commercial casinos across the South grew by 19 percent during the period, the story of Mississippi makes it clear that new expansion, while it has had an overall beneficial effect on the industry, has hurt some established markets that were particularly vulnerable to competition.

years, commercial gaming in New York has become a nearly $2 billion-peryear business, to the detriment of both Connecticut and New Jersey. But what has been the overall impact? Is new growth ruinous to everyone? The answer is no. Since 2001, Delaware, New Jersey and Connecticut (slots only) have seen their gaming win shrink by a combined 27 percent— hardly a growth story. But the region as a whole has seen its gaming win increase by more than 70 percent in the same period. This is, by far, the best record of growth in the nation, nearly double the Midwest’s 41 percent. Furthermore, though last year saw flat revenues for the region as a whole, since the recession the Northeast’s gaming market has grown by nearly 11 percent—again, the best record in the nation. The Northeast’s track record over the previous decade suggests that legalization is creating new demand for casino gambling. While it is not sufficient growth to offset declines in jurisdictions that were primarily reliant on importing gamblers and which have not invested in new facilities on par with Las Vegas, that growth is undeniable, and the reason why expansion continues to be feasible.

Northeast This region has seen the most upheaval. With the densest population, the Northeast is a valuable prize, which is why, despite several mature casino markets, expansion continues here. There is one common denominator in this region: generally speaking, the more mature a market, the worse it has fared over the past decade. Atlantic City, New Jersey, entered the 21st century with close to two-thirds of the region’s gaming dollar; by 2013, that share had fallen to less than one-quarter. Atlantic City had been struggling with new competition for much of the 1990s; the advent of tribal gaming in Connecticut forced several regulatory reforms, but the later opening of racetrack casinos in adjacent Delaware proved that nearby states were eager to recapture some of Atlantic City’s customers. The turning point came in 2006, when Pennsylvania racinos began operation. Within six years, Pennsylvania had surpassed New Jersey to become the second-highest-grossing commercial casino state, behind only Nevada. Since 2001, New Jersey’s gaming win has fallen by more than 33 percent; Atlantic City, where the Atlantic Club casino closed in January, is the poster child for a market hit too hard by surrounding expansion. Expansion has played out in New England, as well, where Maine and Rhode Island have chipped away at Connecticut’s tribal casinos, whose slot income has fallen by 14 percent since 2001. The real threat, however, has come from New York, where racinos began operation in 2004. In the past 10 28

Global Gaming Business JUNE 2014

Northeast Revenue 2001 vs. 2013

$1,250,000

2001

$2,500,000

2013

$3,750,000

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Since 2009, the Strip has regained ground relative to other casinos, even with new expansion; in 2013, at a shade under 17 percent, the Strip is responsible for the highest percentage of total U.S. gaming win since the 1990s. Return to Las Vegas What impact has the expansion of commercial gaming had on Las Vegas? We all know the narrative: thanks to massive investment during the 1990s, the Las Vegas Strip reinvented itself to appeal to a new generation of gamblers and, even as casinos sprouted across the country, its revenues rose to unprecedented levels. That’s all true—revenues did rise. But how did they fare in the big picture? In 1984, when Atlantic City was its only real competition, casino revenues on the Las Vegas Strip were 0.04 percent of the total U.S. gross domestic product. By 1995, that share had risen slightly to 0.05 percent. All of that new investment—which at the point included the Mirage, Excalibur, Treasure Island, Luxor, and MGM Grand—was paying off. The Strip was drawing a bigger share of U.S. wealth. After the 1990s wave of expansion, the Strip still reigned supreme. In 2001, just under 17 percent of the total U.S. commercial casino gaming win came from the Strip. In 2006, that share peaked at over 18 percent. But even before the recession, as gaming proliferated again, that share began to fall—a fall exacerbated by the recession. By 2009, only about 15.5 percent of total U.S. commercial casino win came from the Strip. The Strip lost ground in other ways, as well—its share of total GDP remained constant at 0.05 percent from the mid-1990s until the recession, when it fell once more to 0.04 percent. But, since 2009, the Strip has regained ground relative to other casinos, even with new expansion; in 2013, at a shade under 17 percent, the Strip is responsible for the highest percentage of total U.S. gaming win since the 1990s.

Is Gaming Really Growing? Comparing overall U.S. GDP to total gaming revenue yields an interesting insight: before the recession, commercial gaming’s share of the U.S. economy 30

Global Gaming Business JUNE 2014

crested at 0.29 percent. Since then, despite a recovery, gaming’s percentage of GDP has fallen steadily to 0.24 percent. What does this shift mean? It suggests that the recession has changed U.S. consumer spending in ways that will continue to impact the casino industry. Simply put, it looks like domestic gamblers had more money—or a greater willingness to gamble the money they had—before the recession. The decline of states like New Jersey is not a symptom of an underlying problem for the gaming industry, but the experience of Las Vegas is telling. Since the recession, Las Vegas has enjoyed record numbers of visitors, but the total gaming win—despite an infusion of cash from international high rollers—has not reached pre-recession highs. The industry, then, while it has expanded, has become more competitive. While the market is growing, it is not growing—in relative terms, at least—at the same rate that it did during earlier expansions. There are no longer massive swaths of the country with no casinos. And, barring a sudden turn towards Puritanism, there is no reason to believe that the market will substantially contract. While some states will see revenues fall and then plateau, on the whole the casino industry looks to have reached a point where it can still grow modestly. All of this leads back to the idea that, while there have been some left out in the cold, the expansion of gaming has been positive for the industry as a whole. In 2013, commercial casinos earned more money and were more dispersed than ever before, and incremental expansion in the near future seems to suggest that this pattern will continue. David G. Schwartz is the director of the Center for Gaming Research at UNLV and the author of several books, including Grandissimo: The First Emperor of Las Vegas.

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How slowing casino growth poses problems for tribes

By Dave Palermo

hen a landmark 1987 U.S. Supreme Court ruling and congressional legislation the following year launched what is today a $28 billion American Indian casino industry, indigenous leaders warned that the opportunity for economic success would likely be brief. Indian leaders and their legal consultants cautioned that justices who in California v. Cabazon Band of Mission Indians upheld the right of indigenous governments to operate casinos on tribal lands could just as easily turn against tribal sovereignty. They also lectured Native America that federal bureaucrats and the same Congress that enacted the Indian Gaming Regulatory Act (IGRA) had historically proven to be unpredictable, if not punitive, when it came to federal Indian policy. Finally, there was a nagging paranoia throughout Indian Country that a nation that had once denigrated its indigenous people would not readily accept social and economic progress on Indian lands without demanding a piece of the action. The mantra of Indian governments in the early days of IGRA was to diversify their economies in anticipation of the eventual demise of tribal casinos. They saw the threat as coming through the courts, Congress, changes in federal Indian policy or, perhaps, states legalizing commercial casinos. “There is no longer the notion of tribes pulling themselves up by the bootstraps,” Ron Allen, chairman of both the Jamestown S’Klallam Tribe and Washington Indian Gaming Association, said in 2007. “Now the notion is, ‘Why should tribes get all the gold in them there hills?’ “It’s OK for tribes to be poor. Now that some of us are well off, that is unacceptable.” Allen and others like him have proven prophetic. 32

Global Gaming Business JUNE 2014

Supreme Mistreatment The Supreme Court, which in the 1970s and ’80s supported tribal sovereignty in an era of Indian self-determination, has under Chief Justices William Rehnquist and John Roberts railed against indigenous governments. Rulings in Carcieri v. Salazar in 2009 and Salazar v. Patchak in 2012 have seriously impacted the ability of tribes to place land in trust for gambling and other purposes. Meanwhile, a growing number of those in Congress angry at what they perceive to be an unwarranted proliferation of tribal casinos are threatening to enact legislation to limit the fee-to-trust process. The high court rulings, federal policy and the slow, cumbersome and expensive land/trust process—along with restrictive tribal-state gambling compacts—have combined to constrict expansion of tribal government gambling, obstacles not faced by the commercial casino industry. But neither the courts nor Congress can be entirely blamed for the fact the double-digit growth that once defined Indian gambling has since 2007 crawled to a near halt. Instead, it appears tribal operators of many of the more than 425 tribal casinos in 28 states are faced with a maturing, if not saturated, gambling market. They have become victims of their own largesse. The figures are telling. After nearly two decades of double-digit growth following the enactment of IGRA, annual gross gambling revenue has increased only $2 billion since 2006, according to audits by the National Indian Gaming Commission (NIGC), the federal regulator of tribal casinos. Tribal gambling revenues reached $28.1 billion in 2012, a modest 2 percent increase over the previous year, according to economist Alan Meister,

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Neither the courts nor Congress can be entirely blamed for the fact the double-digit growth that once defined Indian gambling has since 2007 crawled to a near halt. Instead, it appears tribal operators of many of the more than 425 tribal casinos in 28 states are faced with a maturing, if not saturated, gambling market.

author of the annual Indian Gaming Industry Report. The 2012 figures continued a year-to-year growth trend of less than 4 percent since 2007, and it threatens to stay at that level or lower for the foreseeable future. Meister’s report also stated there was only one more tribal gambling operation in 2012 than the previous year. Meanwhile, NIGC in 2012 audited 425 casinos, just 20 more than in 2008.

Diversification Is Crucial The slow growth in the tribal casino industry is alarming because gambling revenues are used to subsidize government programs. “I wouldn’t say gambling is a dying industry. But it’s certainly a maturing industry. And tribes need to be prepared,” says Dante Desidario, executive director of the Native American Finance Officers Association (NAFOA). While tribal government gambling remains a viable revenue source, the mantra of diversification that rallied Indian governments two decades ago has a greater sense of urgency. Many tribes are pursuing gambling-related developments such as hotels and convention facilities and retail and entertainment options. “It’s an absolute logical next step,” says Kristi Jackson, vice chairman of Tribal Financial Advisors (TFA), an independent investment bank. “When dollars are continuing to come in … why go into another business?” The Santa Ynez Band of Chumash Indians is planning a new hotel at its Santa Barbara, California casino. The Nottawaseppi Huron Band of the Potawatomi hopes to develop a

water park, bowling alley and office complex adjacent to its FireKeepers Casino in Battle Creek, Michigan. And the Poarch Band of Creek Indians of Alabama is partners in a $24 million hotel in Pensacola, Florida. Other tribes—most notably the Oklahoma Chickasaws, Seminole Tribe of Florida and Mohegan and Mashantucket Pequots of Connecticut—are venturing into commercial gambling. Expansion of gambling-related business enterprises is not construed by many to be true economic diversification. “If gaming is the core business and all of a tribe’s investments are as an outgrowth of the core business, that’s not really diversification,” says Katherine Spilde, chair of the Sycuan Institute on Tribal Gaming. “It’s creating different departments in the resort gaming model.” But diversification away from gambling is not easy. “It’s hard, when you’ve got something that’s working—that you know all about—to turn your attention and resources to another business you know nothing about,” says John Tahsuda, principal in Navigators Global. “When you’re the elected leader of a tribe, it can be politically risky to get involved with something that doesn’t pan out.” “It’s hard to make diversification happen when there is a group of people (such as a tribal government) that has to make the decision,” Jackson says. “But when you start to see cash flow fall—that the casino business has peaked and you’re starting to spend more marketing dollars to get people through the door—you start to feel more pressure to diversify.” Desidario says tribes can use the cash flow from gaming to determine the next steps. “Because of gaming, there are resources available that we hadn’t had before to be able to diversify,” Desidario says. “It’s a maturing industry, and now what’s the next step? What are the industries that fit with a tribe’s identity that they would want to focus their efforts on?”

Slow to No Growth The impact of the slowing growth in the Indian gambling industry is impacting most of the 366 tribes in the lower 48 states, 247 of which operate casinos and some 60 others that share in the revenues. “There’s a refocusing on tribal budgets, determining which programs are sustainable,” Jackson says. “There’s a need to re-evaluate spending, making sure resources are being allocated appropriately. “A fair number of tribes are recognizing that gaming is what it is; they are no longer going to get 20 percent year-over-year growth. “As a result, they need to think through which government programs in place are necessary, which are self-sustaining and which require increased JUNE 2014 www.ggbmagazine.com

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There remain opportunities for gambling growth in Indian Country. States such as Alabama, Alaska, Nebraska, Montana and Kansas which are currently limited to Class II, bingo-style gambling can with state approvals expand to more lucrative Class III, casino-style gambling. Texas and other states remain fertile ground for tribal government gambling. funding, making sure their prioritizations are right.” The overall picture is not bleak, by any means. “Certainly, new properties coming on line are rare,” Spilde says. “We also have properties closing. But there’s still an incredible amount of improvement in Indian Country.” While the number of wildly successful tribal casinos is limited to a few dozen urban gambling resorts, larger, rural tribes in the Midwest, Southwest and Great Plains with small, marginal operations have also seen significant economic and social improvement over the last two decades. Depending on their demographic profile and other factors, tribes generally have adopted three economic strategies, Spilde says. Some have turned to natural resource and traditional and renewable energy development, while others contract for goods supplied to federal agencies such as the Defense Department. Still others leverage their governmental status and civil regulatory authority. “Obviously, the biggest example of that is gaming,” Spilde says, with tobacco sales still a major business endeavor. “All these tribes are making significant capital investments in their communities,” she says. “They are investing in health care and education and housing. It’s not the same as commercial gaming.” Gambling and other tribal enterprises have afforded a largely economically deprived Native America with a great deal of business acumen, financial literacy and political and legal expertise. “It’s a huge generalization, but there is more sophistication now among tribes because most of them have been through at least one round of financing,” Jackson says.

Gaming Growth Not Gone Meanwhile, there remain opportunities for gambling growth in Indian Country. States such as Alabama, Alaska, Nebraska, Montana and Kansas which are currently limited to Class II, bingo-style gambling can with state approvals expand to more lucrative Class III, casino-style gambling. Texas and other states remain fertile ground for tribal government gambling. “The notion that the tribal gambling has plateaued is not truly accurate,” Spilde says. The tribal casino market is subject to artificial restrictions that do not affect commercial gambling, Spilde says, such as tribal-state compacts that limit the number of slot machines. Changes in federal Indian policy, a congressional “fix” to the Carcieri and Patchak rulings and tribal-state compact renegotiations also can impact the industry. But there are a number of forces working against tribes, not the least of which is the potential competition from commercial casinos in Florida, New York and elsewhere.

Federal Policy And Gambling Restrictive fee-to-trust casino policies under the Bush administration have loosened considerably under President Obama and, more recently, the appointment of Assistant Secretary Kevin Washburn. “The Bush administration was not in favor of taking any land in trust for 34

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gaming, especially off-reservation land,” attorney George Skibine, a former high-ranking Interior official, told attendees of the International Masters of Gaming Law (IMGL) conference last April in San Diego. But tribes remain hampered by Congress’ failure to get a legislative “fix” to Carcieri, which limits the ability of Interior to place land in trust for tribes not “under federal jurisdiction” with passage of the Indian Reorganization Act of 1934. IGRA generally restricts gambling on newly acquired lands beyond existing reservations to those tribes recognized when the act was passed in 1988, requiring that the projects don’t harm surrounding communities and are approved by the state governor. Along with what are known as “two-part determinations,” IGRA also allows “equal footing” exceptions for newly recognized, restored and landless tribes and those seeking casinos on acreage acquired through federal land claims. The “equal footing” exceptions do not require a governor’s approval. Critics in and out of Congress, including some casino tribes, lump all IGRA exceptions into the misleading category of “off-reservation gambling,” claiming abuses of the law and federal policy by Indian groups backed by moneyed developers constitute “reservation shopping.” Whether IGRA and the federal fee-to-trust system have been abused is subject to interpretation. While a number of Interior rulings on gambling on newly acquired lands have been controversial, Meister said Interior has approved 62 IGRA land/trust exemptions since 1988, of which 45 have resulted in the development of tribal casinos. That represents about a tenth of the nation’s Indian casinos. “Overall there have not been a huge number of applications that have been approved,” Meister told IMGL delegates. “It’s something, but it’s not a vast majority of what has developed in Indian gaming.” Since President Obama took office, Interior has ruled on 21 applications to place land in trust for casinos, approving 14 and rejecting seven. There are currently 18 applications for casino land that fall into both the “off-reservation” and “equal footing” IGRA exemptions. Congressional critics—notably Senators Dianne Feinstein of California, Charles Schumer of New York and Sheldon Whitehouse and Jack Reed of Rhode Island—have blocked efforts to legislate a remedy to Carcieri, seeking a halt to what is already a stagnant tribal casino market. The congressional stalemate angers tribal leaders who note that casino land/trust applications have comprised only a small percentage of the nearly 1,500 fee-to-trust applications processed by Interior in the Obama administration. Acquiring trust lands is crucial for reservation economic development and government infrastructure. “When the Obama administration came into office one of the priorities clearly was to take land into trust, not necessarily for gaming,” Skibine says. Along with crippling the federal land/trust process for non-gaming reservation developments, Carcieri and Patchak, which extends the period lawsuits can be filed on fee-to-trust decisions, “largely impact greenfield (casino) projects,” Jackson says. “Of course,” she says, “there are not too many of those.”

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MaSSachuSettS

MeSS

Bay State plods toward casino business

By George Brennan

he roulette wheel that is the Massachusetts casino market continues to spin and where the ball will land remains a mystery. Two and a half years after Governor Deval Patrick signed the Expanded Gaming Act into law and more than two years after the Massachusetts Gaming Commission held its first meeting, the only license awarded is the lone slot parlor license to Penn National Gaming for a 1,250slot facility at Plainridge Racecourse in Plainville on the Massachusetts-Rhode Island border. The rest of the market remains in flux. “Disorganized,” Clyde Barrow, a gaming expert who watches the Massachusetts market closely, said using one word to describe the state’s licensing process. “And I’m trying to be polite.”

bowing out of the debate. It’s unclear what effect Crosby’s recusal will have on the speed of the process. “Massachusetts has already taken longer than any state in history to license a casino,” Barrow said. Other jurisdictions have gotten casinos up and running quicker. Ohio’s casino law went into effect in September 2010 and less than two years later the state’s first casino opened. New York voters approved adding four commercial casinos last fall and, in April, 22 companies paid the $1 million application fee to make a bid. The New York Gaming Facility Location Board

Regulatory Recusal And that was before Gaming Commission Chairman Stephen Crosby recused himself from the deliberations and selection of a Greater Boston casino. At the commission’s May 8 meeting, Crosby said his involvement had become a distraction. Crosby reportedly attended a Kentucky Derby event at Suffolk Downs, a racetrack that is one of the applicants for a casino license. Though Crosby paid his own way to the event, Patrick, who appointed Crosby in 2012, openly questioned the chairman’s judgment. It’s not the first time his judgment has been questioned during the twoyear process. A former business partner owns a stake in land under agreement with Wynn Resorts, and attorneys for Boston Mayor Martin Walsh questioned Crosby’s ability to remain impartial in making a decision on the city’s status as either a host or surrounding community because of public comments. “The compounding of these issues has now gotten to the point where my participation in the decision-making process has become a distraction and a potential threat to our critical appearance of total impartiality,” Crosby said in

Massachusetts Governor Deval Patrick (r.) has lately been looking over the shoulder of Gaming Commission Chairman Stephen Crosby very intensely.

CROSBY REPORTEDLY ATTENDED A KENTUCKY DERBY EVENT AT SUFFOLK DOWNS, A RACETRACK THAT IS ONE OF THE APPLICANTS FOR A CASINO LICENSE. THOUGH CROSBY PAID HIS OWN WAY TO THE EVENT, PATRICK, WHO APPOINTED CROSBY IN 2012, OPENLY QUESTIONED THE CHAIRMAN’S JUDGMENT. CROSBY IS ALSO NAMED IN A LAWSUIT BROUGHT BY CAESARS ENTERTAINMENT IN DECEMBER THAT ALLEGES CROSBY HAD CONVERSATIONS WITH WYNN URGING HIM TO MAKE A BID FOR AN EVERETT CASINO. A FORMER BUSINESS ASSOCIATE OF CROSBY’S, PAUL LOHNES, HAS AN OWNERSHIP INTEREST IN THE LAND AND STANDS TO PROFIT FROM WYNN’S PURCHASE OF IT. 36

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Steve Wynn has high hopes his casino proposal in Everett will be the winner of the Boston-area license.

MGM Resorts’ project planned for Springfield

THE BATTLE FOR A CASINO IN THE GREATER BOSTON MARKET, KNOWN AS REGION A IN THE LEGISLATION, NOW PITS LAS VEGAS MOGUL STEVE WYNN OF WYNN RESORTS AGAINST MOHEGAN SUN, WHICH OPERATES ONE OF THE COUNTRY’S LARGEST INDIAN CASINOS IN NEARBY CONNECTICUT.

expects to award licenses in the fall. Crosby, in an interview before the Derby debacle, called Ohio a “ridiculous” comparison. Ohio’s legislation picked the locations for casinos and New York says it will license casinos by the fall, but Crosby said he will believe that when he sees it. “A year ago we were getting our brains beat in because New Hampshire was going to beat us to the punch,” Crosby said. To date, New Hampshire has not legalized casino gambling. Massachusetts had to build the state agency from the ground level at the same time it developed regulations, Crosby said. Lately, he’s taken to pointing out that it is some of the casino companies who are now asking the commission to put the brakes on. “We set out with two priorities,” Crosby says. “One was the integrity of process and two was robust competition for the licenses. We didn’t say speed. Both of those require time.” On June 23, the Massachusetts Gaming Commission is scheduled to issue a full-scale casino license in Western Massachusetts. MGM Springfield, an affiliate of MGM Resorts International, is seeking a conditional award of the license for its $800 million facility in downtown Springfield citing an effort by casino opponents to repeal the state’s gaming law. Once a license is issued, MGM would be on the hook for $200 million, including an $85 million payment to the state for the license. There is no provision in the law to make that refundable if there is a successful repeal. “That’s something the legislature did not anticipate,” Barrow says of the effort afoot to repeal the law. On May 5, the Massachusetts Supreme Judicial Court heard arguments on whether to allow the ballot question. The state’s highest court took the case under advisement and is expected to rule by July. The commission has not acted on MGM’s request. Meanwhile, statewide polls continue to show support for casinos is strong as long as the facilities are in someone else’s back yard. In April, Western New England College issued results of a survey of 477 adults that showed 59 percent support casinos in Massachusetts while 34 percent are opposed. Seven percent of those surveyed either were undecided or declined to answer, according to the results. When the question was asked about where casinos should be located, 55 percent said they oppose a casino in their community, while 42 percent said they would support having a casino in their home town and 3 percent were undecided or declined to answer, according to the results.

Still Standing MGM’s application in Springfield is the last bid standing in what was once the most robust market in Massachusetts. A proposal by Ameristar in Springfield was virtually over before it even gained a foothold and Penn National moved along to partner with Plainridge after Springfield leaders picked the MGM pro-

posal to support. In September, Hard Rock was sent packing by voters in West Springfield and in November Mohegan Sun failed to win support of voters in Palmer for a casino there. One of the requirements of the Massachusetts law is winning support through a referendum in the city or town where a casino is proposed. Mohegan Sun has since teamed with Suffolk Downs for a casino in Revere after Caesars Entertainment bowed out of its deal under pressure resulting from the company’s background check. The battle for a casino in the Greater Boston market, known as Region A in the legislation, now pits Las Vegas mogul Steve Wynn of Wynn Resorts against Mohegan Sun, which operates one of the country’s largest Indian casinos in nearby Connecticut. Wynn is proposing a $1.6 billion hotel and casino in Everett on a former Monsanto chemical plant site that needs to be cleaned up. The facility would be across the Mystic River from the Boston skyline. Mohegan Sun, which took over for Caesars Entertainment after a messy split with the Suffolk Downs partners, is proposing a $1.3 billion hotel and casino in Revere after East Boston voters rejected having the casino on the portion of the racetrack that is located in their city. Suffolk Downs straddles the city line between East Boston and Revere. It was long considered the front-runner for the Region A license before Wynn entered the game and East Boston voters rejected the Suffolk Downs proposal. In recent months, newly elected Boston Mayor Martin Walsh has been a vocal player in the debate over a Greater Boston casino. He hasn’t picked sides, but wants more of a cut of the action no matter which company gets the license. The mayor unsuccessfully lobbied the gaming commission to make Boston a host community, which would give it more of a say and more revenue from either of the two facilities approved by the gaming commission (and would have subjected the two proposals to a new referendum, the results of which would have been questionable). The commission gave Walsh, once a vocal supporter of the casino law as a state representative, an extension to try and work out a deal on his own with the developers, but when that was unsuccessful, the four remaining commissioners declared the two venues outside the city limits. Cities and towns designated as surrounding communities are also entitled to compensation, but it’s typically a small percentage of what a city or town JUNE 2014 www.ggbmagazine.com

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The Mohegan Sun project at Suffolk Downs will be wholly owned by the Connecticut tribe, with the racetrack owners serving as just the landlords.

gets for hosting a casino. In a letter to the commission in April, attorneys for Walsh called on Crosby to remove himself from the host community discussion, citing biased comments he made against Boston. “Throughout the process, Chairman Crosby has made several statements, which the city deems prejudicial, including criticizing the city for asserting its host status on behalf of its public,” the letter states. Crosby had remained an active participant, but the Derby event was the final straw. Crosby is also named in a lawsuit brought by Caesars Entertainment in December that alleges Crosby had conversations with Wynn urging him to make a bid for an Everett casino. A former business associate of Crosby’s, Paul Lohnes, has an ownership interest in the land and stands to profit from Wynn’s purchase of it. Crosby knew Lohnes was involved in the land deal in the fall of 2012, but waited until August to disclose it to Patrick and until October to seek an opinion from the state’s Ethics Commission. At one point the property was under agreement with Wynn for $75 million, $40 million above market value. Crosby did not participate in a discussion and vote by the commission in approving the revised price negotiated by Wynn for the Everett land. Caesars withdrew as a partner in the Suffolk Downs bid after questions were raised by commission investigators about the company’s ties to hotel operator Gansevoort, whose principal is alleged to have ties with the Russian mob. The company’s suit against Crosby and the commission is pending in U.S. District Court. A deadline for discovery in the case was May 30. The commission now expects to award the Greater Boston license sometime in August or September, though no exact date is provided in its published timeline.

Tribal Turmoil In Southeastern Massachusetts, the licensing landscape is even cloudier. “That’s the biggest mess of all,” Barrow says. The Mashpee Wampanoag Tribe, which has proposed a $500 million Indian casino in Taunton, remains a key player in the region. In order to build the casino, the tribe has to overcome federal legal hurdles, including the 2009 U.S. Supreme Court ruling Carcieri v. Salazar, which calls into question the U.S. government’s authority to take land into trust for tribes recognized after the Indian Reorganization Act of 1934. The Mashpee tribe gained federal recognition in 2007, but in documents filed with its land application has said the high court ruling does not apply because the tribe was under federal jurisdiction in 1934, a key distinction. The federal Bureau of Indian Affairs has not yet ruled on the tribe’s appli38

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cation, though it is currently under review by environmental regulators. Cedric Cromwell, chairman of the Mashpee Wampanoag Tribe, says the Final Environmental Impact Statement is expected soon and a decision should come on the heels of that. “We’re right on track,” he says. There is skepticism. “The tribe has been saying their casino is imminent for seven years,” Barrow says. “I guess it depends on what your definition of imminent is.” Still, there’s no question the prospect of a tribal casino is having an impact. “Because of their presence in Taunton, it’s having a dampening effect on commercial operators to come into the region,” Barrow says. KG Urban Enterprises, a company that hopes to build a casino on the New Bedford waterfront, has had difficulty attracting a gaming operator to invest in the project with the tribal casino looming. Under a tribal-state compact reached between the Mashpee Wampanoag and Patrick, approved by the BIA, the tribe would not have to pay the state any revenue if a commercial casino is licensed in the same region. If the tribe has the only casino in Region C, it would pay the state 17 percent of its gross gambling revenues, under the terms of the compact. Commercial casinos pay a 25 percent tax, which would put them at a competitive disadvantage. Wynn has said commercial companies should pay the same rate as the tribe. “We have no control over setting the tax rate,” Crosby says. Meanwhile, Foxwoods, another Connecticut tribal casino, has entered the commercial market in Massachusetts in Fall River. Rush Street Gaming of Illinois is also kicking the tires on a Southeastern Massachusetts bid, but has not announced a deal with a landowner. The Massachusetts Gaming Commission recently extended the deadline for Phase 2 applications in the region by two months until September 23 and doesn’t expect to issue a license in the region until February 2015. In pushing his proposal in Everett, Wynn has asked for changes in a state law that he thinks is flawed, including a requirement that anyone who wins $600 or more at a Bay State casino must pay the income tax at the casino— something the commission has acknowledged should be looked at by the legislature. Wynn also objects to having compulsive gambling services inside his casino. He’s repeatedly said he’ll walk away from the Massachusetts market if changes aren’t made. Barrow doesn’t doubt that the casino legend means business, though he believes in large part that the Massachusetts legislature got things right in the law that was passed. “This is a guy who has been in a lot of jurisdictions and then disappeared,” Barrow says. Most of his revenues are coming from Macau and his mega facilities in Vegas, he adds. “Massachusetts is a small player in his world.” Mashpee Wampanoag Tribe proposed a $500 million Indian casino in Taunton.

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Online

OppOrtunity How iGaming can lure players to properties by Rodric J. Hurdle-Bradford

MGM Resorts partnered with PlayStudios to create myVegas, an online and Facebook game that delivers bonus points that can be redeemed at MGM properties.

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echnology has influenced the gaming industry in hundreds, if not thousands of ways, and now casinos are using online gaming to give guest a preview of the experience at their properties. “In my opinion, online gaming is a driver for an increase of customer visitation along with bringing brand awareness and attention to the players, especially ones in the younger demographic,” says Kelly Shaw, vice president of system sales and marketing for Aristocrat Technologies. “Once the guest visits the property and sees the amenities and begins to play, you can use analytics to draw correlations between the length of play and the types of games being played. It is also a reason to reach out to inactive players—if you get them to play the online game, they may well want to go back and experience the brick-and-mortar casino.” The brick-and-mortar casinos have learned to embrace their online counterparts, a far cry from the initial adversarial relationship the two entities had about a decade ago. “That fear from land-based casinos was rooted in the basic principle that anything competing for disposable time and income was a competitor,” says Mario Maesano, senior vice president of marketing at Maryland Live! Casino. “That old thought process has been proven wrong, and many of the naysayers have been pleasantly surprised with how a combined strategy can benefit the land-based casino.” Now, in a 180-degree turn, both gaming technology companies and casinos are competing to create synergetic partnerships for a consistent experience, whether you are dressed to the nines in Las Vegas on a Saturday night, or stuck behind a computer in your pajamas on a Wednesday afternoon.

Game-Related Perhaps the most relevant tactic in the online to land-based casino strategy is introducing games online at the same time that they are being introduced on the casino floor. This tactic has been the foundation to the success in the partnership between Maryland Live! Casino and Aristocrat Technologies. “It is very important to us that we launch on the floor and online at the same time,” says Maesano, as Maryland Live! was one of the first gaming companies to jump into the online social gaming environment. “The synergy between the product online and the product on land is more important than ever before.” That synergy is important for both regular players and casual or novice participants. Regular players are often attracted to the popular brand-name games they play at the land-based casino, while the younger demographic tends to play a wide variety of games offered to experience the different types of content available. “Casino operators want a seamless experience,” says Shaw. “They are still constantly searching through analytics to determine what particular personalities play which games. This is becoming even more valuable to our clients because popular games online can often become popular games

Using an Aristocrat platform, Maryland Live! casino created a free-play online casino that ended up attracting thousands of customers to the property.

at the brick-and-mortar property.” The brick-and-mortar properties of MGM Resorts International are the focus of the self-touted “first social gaming project,” known as myVegas. Created by PlayStudios, a new game development company focusing on free-toplay games of chance, myVegas is a Facebook destination that delivers a new level of authenticity and play value as gamers participate in gambling games, unlock and explore a virtual Las Vegas and earn real-world rewards. Through a partnership with MGM Resorts International, PlayStudios secured the exclusive social gaming and mobile rights for all of their Las Vegas properties: Aria, Bellagio, MGM Grand, Mandalay Bay, The Mirage, Monte Carlo, New York-New York, Luxor, Excalibur and Circus Circus. “We have actively watched the explosion of the social gaming landscape, and evaluated the options for extending our brands through these increasingly important channels,” says Bill Hornbuckle, MGM Resort International’s president and chief marketing officer. “In our partnership with PlayStudios, we have created a platform that engages and entertains existing MGM resort customers, and attracts new ones, allowing us to strengthen our brands in a new and relevant fashion.” Not surprisingly, the founder, president and chief executive officer of PlayStudios, Andrew Pascal, previously served as president and chief operating officer of Wynn Las Vegas and Encore after a career with Silicon Gaming developing groundbreaking slot games. “MyVegas is at the intersection of gambling and social gaming,” says Pascal. “With the emergence of Facebook as a leading gaming platform, we saw an opportunity to offer deeper and more engaging game play that captures the true essence of Las Vegas.” By playing a variety of games that include slot and table games, players

“In our partnership with PlayStudios, we have created a platform > that engages and entertains existing MGM resort customers, and attracts new ones, allowing us to strengthen our brands in a new and relevant fashion.” —Bill Hornbuckle, President and Chief Marketing Officer, MGM Resorts International JUNE 2014 www.ggbmagazine.com

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Caesars Entertainment’s World Series of Poker benefits from an online poker presence in New Jersey and Nevada to appeal to players who may register for the “real” tournament, which started in late May in Las Vegas. Foxwoods’ Foxplay, developed by Game Account Network, mimics cash online gaming and includes promotional offers from the land-based casino.

earn loyalty points as they spend time playing the portfolio of games. These points may be redeemed for real-world rewards at any of MGM’s Las Vegas properties. Rewards range from choosing the song for the Fountains of Bellagio or diving with the sharks at Mandalay Bay’s shark reef aquarium to gourmet dinners, luxurious hotel stays, Cirque du Soleil show tickets and access to Las Vegas’ hottest pools and nightclubs. Hundreds of thousands of discrete prizes are also awarded to myVegas loyalists, which amount to millions of dollars in value. As of November 2013, more than 100,000 players have already redeemed over $10 million worth of real-world rewards. This number is expected to increase rapidly with the myVegas expansion from the web to mobile devices. “The mobile launch of myVegas slots represents a significant opportunity for our rewards partners within the M life loyalty program,” says Tom Mikulich, senior vice president of business development for MGM Resorts International. “It allows us to provide a unique and accessible way for our customers to engage with brands they already love—and to discover new ones that will equally delight.”

Real or Memorex? Just in February, Foxwoods Resort Casino, the largest resort casino in North America, announced its partnership with GameAccount Network to launch the first-ever “Simulated Gaming” online casino experience in the United States. They have named the online casino “Foxplay,” allowing users the ability to enjoy the Foxwoods experience from their own electronic devices. “This is another way for our guests to enjoy all that Foxwoods gaming has to offer,” says Scott Butera, president and chief executive officer of Foxwoods Resort Casino. “We think this cutting-edge technology will enhance the overall guest experience and allow them to bring the excitement of Foxwoods with them wherever they go.” The Foxplay online casino is accessible to players across the globe through numerous platforms, including Android phones and tablets, iPhones, iPads and mobile formatted browser play. The simulated casino will eventually feature over 50 skill games from the GameAccount Network library as well as dozens of slot and table games. Promotional offers from Foxwoods are available to anyone who plays. “With the changing landscape of online gaming we are excited to launch Foxplay,” says Dermot Smurfit, chief executive officer of GameAccount Network. “The Foxplay online casino will enhance the online game experience across the world.” 42

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The World Series of Poker was one of the early entities to embrace online capabilities with its exclusive online satellite qualifier for the land-based World Series of Poker at WSOP.com. The 2014 satellite qualifiers started in February, so players in Nevada or New Jersey can play online at WSOP.com or players can participate in live satellite events at the Rio during the World Series of Poker from May 27 to July 7. “The lure of online and affordable qualification into the World Series of Poker has proven to be a very successful model to drive attendance to the live event,” says Seth Palansky, sports entertainment director of communications for Caesars Entertainment, operator of the World Series of Poker. “Our attendance for the main event has gone from 839 in 2003 to 6,352 in 2013. Satellites play a big part in these entries.”

Player Participation One of the immediate assumptions of the online to land-based theory is that the online participants are going to be drawn from a younger demographic and less experienced at a casino. While this may be true for many online products, both the casino and online vendors want to take the opportunity to look at each individual player and the value they could bring to the property. “We like the ability to look at the player holistically so we get a full view of the players’ behavior to analyze the best promotional offers that drive personal interest in hobbies,” says Shaw. “It is a real opportunity to build loyalty with customers which will drive value in revenue into the business with brand awareness and increasing visibility.” Maryland Live! Casino officials have reaped the benefit of a stronger connection with players, but were initially shocked by the demographics they observed. “We were surprised at the age of our users,” says Maesano. “We thought it would be more of the 21-to-35 demographic, but our average user age is older, in the 45-to-60 demographic that is more likely to go to land-based casinos.” Regardless of age, the average visit to the Maryland Live! site is between eight and 10 minutes, and the site already has over 350,000 monthly visitors. Site visitors log in from as far away as Florida, Michigan and even California. However, Maryland Live! stays focused on recruiting players from the Maryland, Virginia and Washington, D.C. areas. “We are well aware of what our market is, and we like our role as one of the region’s leading entertainment destinations,” says Maesano. “Our online integration with our casino management system is the foundation to attract more visitors for future visits to the property, and we are pleased with the results we have experienced. We are glad that the industry has embraced this trend, and it means a bright future for gaming and all of our guests.”

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California Legislature Takes Up Internet Poker

he California Assembly’s Governmental Organization Committee held a five-hour hearing on whether to legalize internet poker, with one potential online provider, United Auburn Indian Community Chairman Gene Whitehouse, declaring that “regulators know the tribes and the tribes know poker.” Speakers included representatives of some of the largest Indian gaming tribes, card rooms, organized labor, Nevada casinos, and many former legislators representing those interests. One of those interests, PokerStars, the world’s leading online poker room, announced a consortium with the Morongo Band of Mission Indians and some Southern California card clubs just in case online poker becomes legal. Another was Robert Smith, treasurer of the California Tribal Business Alliance (CTBA) and chairman of the Pala Tribe, which operates one of the largest casinos in the state. Pechanga Chairman Mark Macarro said most tribes support his tribe’s efforts because they would like to “design the business rather than get run over by it.” Anita Lee, a fiscal and policy analyst, described how online gaming is conducted in three other states that have legalized it. Former Nevada Gaming Control Board Chairman Mark Lipparelli said online gaming has been “nearly scandalfree” in his state, and that online gaming doesn’t lend itself to money laundering. Not everyone at the hearings was in favor of internet poker. Gaming mogul Sheldon Adelson, who has mounted a nationwide campaign against online gaming, sent a representative to argue his position. Bo Mazzetti, chairman of the Rincon tribe in San Diego County, warned of “bad actors,” i.e. online providers that have previously violated federal law on online gaming. He undoubtedly had in mind PokerStars, which ran afoul of the U.S. Justice Department on “Black Friday,” April 15, 2011, when two of its former executives were indicted. While PokerStars settled the claims with no admission of guilt, it paid over $750 million to the DOJ. And the announcement that PokerStars had partnered with the Morongo tribe, along with the state’s three largest card clubs—the Commerce 44

Global Gaming Business JUNE 2014

Morongo Chairman Robert Martin said a deal with PokerStars would bring “financial benefits” to California.

Club, the Hawaiian Gardens Casino and the Bicycle Casino—was met with disparagement, although the participants believe it will be good for California. “We’re confident that, together, we can offer a safe, secure, high-quality online poker experience that brings financial benefits to California while providing the highest level of accountability, choice, service and protection for consumers,” said Morongo Chairman Robert Martin. Martin is against the “bad actor” language, saying it was aimed at particular vendor because it only applies to activities after 2006. He suggested vetting a company’s entire history before letting it apply for a license. “Efforts by a select few interests to rewrite longstanding and effective policy in order to gain a competitive market advantage or to lock out specific companies is not in the best interests of consumers or the state and will be vigorously opposed by our coalition, online poker players and many others,” Martin said. Key lawmakers predict that there will be a deal on internet poker passed by the end of August, when the legislature finishes its work for the session. There are currently two active bills, one in the Assembly and the other in the Senate. The CTBA supports the Assembly bill. According to Smith, “CTBA is in favor of iPoker but this new platform must be delivered methodically and with a clear understanding of the market we’re entering.”

New Jersey Could Enter Interstate Online Gaming Compact in 2014

nterstate agreements where states share online gamblers are seen as a vital next step if online gaming is to continue to grow in the U.S.

Nevada and Delaware have already signed an agreement, and the third state to allow online gaming—New Jersey—could enter into that agreement and others by the end of 2014. That’s the word from Mario Galea, online gaming consultant for the New Jersey Division of Gaming Enforcement, in an interview with Calvinayre.com. Galea, a former chairman and CEO of Lotteries and Gaming Authority of Malta, was hired by the DGE in May 2013 to oversee the implementation of online gaming in New Jersey. “All the hard work has been done,” Galea said. “The next step is now for New Jersey to go out there and say, ‘Hey, we have the systems in place; you guys can use our systems to be able to share that information.’” Galea said the state is also interested in joining with Delaware and Nevada. “New Jersey is definitely looking at that agreement, and I’m pretty sure they would be happy to come into that agreement,” Galea said.

Online Poker Declines in France

harles Coppolani, the new president of French online gaming regulator ARJEL, blamed the continuing slide of the French online poker market on Europe’s financial crisis, but also on a cooling of interest in the online game. Speaking with the French financial newspaper Les Échos, Coppolani French iGaming regulator said he feels the Charles Coppolani market for online poker in the country has matured. The “first element” in the decline, Coppolani said, is the European financial crisis, but he added that poker “has difficulty recruiting new players” and that the game is too complicated for a “rather young audience.” “The fad is over,” he stated. “Basically, the online poker market may be mature.” Mario Galea, The French online poker online gaming consultant for market has fallen by around the New Jersey 15 percent in the last two Division of years. Some have advocated Gaming France allowing player bases Enforcement to be shared with other jurisdictions, but French lawmakers have shot down that idea. The country has also been criticized for overtaxing on-

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line sites. Coppolani says he plans to focus on nonFrench licensed operators targeting the market. “Player protection is an ongoing priority,” he said.

Bwin.party Urges Shareholders to Vote Against Ader Appointees

he bwin.party board is urging its shareholders to reject resolutions put forward by SpringOwl, the investment vehicle of Jason Ader. Ader, through SpringOwl, now owns about 5 percent of the company and is seeking to appoint four new members to the company’s board. The company has written its investors asking them to vote against the resolutions due to the lack of information it has received on the nominees proposed. The company also says the appointments are not in the best interest of the company. “On the limited infor-

mation presented to date by SpringOwl on each of the proposed director nominees, and having consulted with many of its leading shareholders and depositary interest holders, the board is recommending that shareholders and depositary interest holders vote against the SpringOwl resolutions,” the letter stated. SpringOwl was able to nominate one board member under a “Relationship Agreement” reached after it purchased a 6.1 percent stake in bwin.party. Published reports say the company now controls a little more than 5.2 percent of the company. SpringOwl, however, has put forth four other nominees—Michael Fertik, a U.S. technology entrepreneur; Francis Grady, founder of a law firm that specializes in U.S. banking regulation; Kalendu Patel, a venture capitalist; and Steven Rittvo, the chairman of U.S.-based gaming consultant The Innovation Group. Company officials said SpringOwl is trying to “bypass” the routine nomination process and is “putting at risk the ability of the board to operate as a unified and effective forum in the best interests of all shareholders and depositary interest holders.” Innovation Group Chairman Steven Rittvo is one of Ader’s nominees for the bwin.party board.

Boyd Gaming Expects Online Profit in New Jersey by End of Year

ne-time startup costs have kept Boyd Gaming’s online gambling sites in New Jersey— through the Borgata Hotel Casino & Spa—in the red, but Boyd officials expect a profit by the end of 2014. Boyd Gaming CEO Keith Smith, speaking on a conference call with reporters, said he expects online gaming in New Jersey “will be cash-flow neutral or profitable by the end of the year.” Boyd lost $3.2 million through online gambling in the first quarter of the year. Smith said the loss came from one-time costs associated with the launch of Borgata’s online poker and casino brands. “Like any startup business, we invested heavily in marketing and advertising,” Smith said. “Of the $3.2 million operating loss reported by our online business during the quarter, about $2 million was due to one-time, nonrecurring expenses.” Smith said he doesn’t think a reduction in marketing costs will hurt the sites, which have taken the early lead in the New Jersey online gambling market.

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JUNE 2014 www.ggbmagazine.com

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iGAMING NORTH AMERICA

California Here We Come

The Golden State considers legalizing online poker

ll eyes are on California at the moment to see if this population behemoth will pass an internet poker bill. It may be 2014 or 2015, but the conventional wisdom is that they’re getting closer to passing a bill. The pace of legalization of internet gaming in the U.S. has been painfully slow. With the initial rush of Nevada, Delaware and New Jersey regulating the activity in 2013, things have slowed down as some states which had proposed legislation have adopted a more “wait and see” approach. And, frankly, for our non-American counterparts who may not be familiar with our system in the U.S., once you put these decisions in the hands of state legislators, anything can happen. With a population of 38 million, California is clearly seen as the Holy Grail when it comes to a licensing jurisdiction. And officials from that state have been clear on two items: 1) they envision poker only, and not casino games online; and, 2) they don’t see the need to enter into interstate compacts to pool liquidity, as they have enough critical mass within their borders. The first bill to legalize internet gambling was introduced in 2008 by California Assemblyman Lloyd Levine. Bills have repeatedly been introduced in each subsequent session so far to no avail. Senator Rod Wright, a longtime proponent and sponsor of such bills, was convicted of voter fraud recently and has been suspended by the Senate. But other state legislators have risen up to introduce internet poker bills in both the Assembly and Senate this session. The biggest stumbling block so far has been the massive number of business interests involved with this effort to date. Those gaming facilities that currently offer poker in the terrestrial world include the card rooms and tribal casinos. I learned at a conference in the state capital in February that the racetracks are typically not included in the bill (in spite of their interest) because they do not offer poker in their venues. But the numbers on those eligible are staggering. There are 95 licenses for card rooms in the 46

Global Gaming Business JUNE 2014

By Sue Schneider

state and 70 of the 100 federally recognized tribes in California have compacts for gaming. That’s a lot of folks to try to get on the same page and, so far, at least, it hasn’t happened. When I attended the Sacramento conference, I came out with a sense that perhaps there would be some general agreement… at least enough to offer some momentum to the bills. This seemed to be fueled in part by the campaign of Sheldon Adelson against internet gambling. It was felt if California passed an internet gambling bill soon, that even with the passage of a federal ban supported by Adelson, the state would be “grandfathered” in and thus able to operate. Concern over these “anti” efforts were fueled in March when California Senator Dianne Feinstein came out in support of the Adelson Coalition to Stop Internet Gambling. Her position clearly surprised a number of folks in the gaming business in the state. But in April it seemed that the cohesion was starting to crumble a bit. Some groups like the California Tribal Business Alliance made it clear that the “bad actor” clause was critical to them, and they specifically pointed to PokerStars as the wrench in the works. This difference in perspective was exacerbated in late April when a leading tribe (Morongo) and three of the state’s largest card rooms announced that they had done a deal with PokerStars. The announcement noted that the California operators would be subcontracting with PokerStars for use of their platform and expertise. A day after the announcement, the California Assembly held a marathon, five-hour informational hearing to discuss the issue of internet poker. As many pundits noted, although many alluded to PokerStars, not one witness uttered the name. But the testimony of those who were a party to the deal with PokerStars seemed to vary widely from those who felt that the still-pending charges against the principals with the company

‘‘

should factor into their suitability. So will a bill pass in California any time soon? Who knows? But as long as there are serious philosophical gaps among the proponents, it seems clear that legislators will not be moving forward. In the meantime, what would a system look like in California? When I was listening to the speakers at the Sacramento conference, I recalled a previous iteration of a California internet poker bill that envisioned limiting the number of poker networks to three. It occurred to me that this was what was missing so far in Nevada and New Jersey. Having (potentially) each operator with their own network does nothing toward building liquidity. With their Multi-State Internet Gaming Agreement, the states of Nevada and Delaware are trying to set up a system whereby the players in smaller states are pooled to gain liquidity. But they’re already learning of the technical stumbling blocks with pooling across various commercial networks. How could California’s system truly provide critical mass if some of the prospective 160 operators each find their own technology party? At first, I thought perhaps the card rooms could potentially have one network and the tribes another. That would at least get it down to two. But, the announcement of the deal with PokerStars already bridged that divide by mixing them up. So we’ll just have to watch and see how things play out in California. But hopefully, there are enough “behind the scenes” discussions going on that there can actually be some forward momentum on the legislative front.

As long as there are serious philosophical gaps among the proponents, it seems clear that legislators will not be moving forward.

”

Sue Schneider is one of the world’s leading experts on the internet gaming industry. She currently serves as editor-at-large for Liebert Publications’ Gaming Law Review and Economics. In addition, she’s a partner with the U.S.-based conference iGaming North America.

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GLOBAL GAMING WOMEN

Mentoring is a Two-Way Street Encouragement and inspiration are just part of this relationship

By London Swinney, Vice President of Casino Operations, MGM Grand Las Vegas

hroughout my 25 years in the gaming industry, I’ve been fortunate to have been mentored by some of the most knowledgeable and articulate women and men in the gaming industry. I now find myself serving as a mentor to women advancing their careers in the industry. Whether the student or the teacher, the mentor relationship is equally rewarding; it’s about learning, sharing and growing together. Debra Nutton, executive vice president of casino operations at Wynn and Encore, has been one of the most impactful mentors in my career. I like to say that Debi gave me a shove when I needed it. An opportunity arose at a sister property within MGM Resorts, and Debi recommended that I pursue the opportunity. At the time, my children were young, I was content in my current job and, quite frankly, questioned my own readiness for the position. As a true advocate, Debi insisted that I was ready and capable, and should apply for the position. Not only was that opportunity the pivotal

“

a strong network of executive women from all over the industry. We share experiences, offer advice, and support the development and advancement of each other. Currently, I am mentoring three women at different stages in their careers. When mentoring or offering career advice, I reflect on the mentoring and coaching that I received at different stages in my career. The concerns one faces coming right out of college and entering the job market differ from those of a director-level executive aspiring for a vice president position. The leadership that I’ve received along the way has continued to shape my path. In my first position as director of casino operations at New York-New York, I reported to Trevor Scherrer, who is currently president and COO at the Mirage. Trevor nurtured my analytical skills by insisting that I present data to support my operational decisions; I learned to always come prepared. I later reported to Cindy Kiser Murphey, president and COO at New York-New York. Cindy met with me frequently to discuss the operational needs of my department as well as my career develop-

Whether the student or the teacher, the mentor relationship is equally rewarding; it’s about learning, sharing and growing together. moment in my career, but it has allowed me the confidence to welcome the unknown and the growth that comes with it. For Debi and me, that opportunity was the beginning of great mentor/mentee relationship— and an even better friendship. Debi has exposed me to some of the most amazing people in the gaming industry; she is a master at networking and bringing people together. With Debi’s encouragement, I completed my degree in business management, became a member of the Leadership Las Vegas class of 2011, and began participating in Global Gaming Women initiatives. I learned the importance of networking, and have been able to meet and connect with 48

Global Gaming Business JUNE 2014

”

ment. She emphasized the importance of building a team and succession planning. How well had I developed my team? Renee West, president and COO of Luxor and Excalibur, set a very clear vision and strategic plan for the executive team to execute. I learned to hold my team and myself accountable for plan execution. Scott Snow, SVP and CFO of Luxor and Excalibur, consistently challenged me and the rest of the team to find new, improved and more efficient processes that would streamline operations; I learned to challenge the status quo. In my current position at MGM Grand, Scott Sibella, president and COO, is a great example of execution and vision. He has made amazing

progress to our property and today, MGM Grand continues to be a top destination for entertainment in Las Vegas. Both Scott and Mike Neubecker, SVP of finance and CFO, have taught me to remain focused on proven strategies, allow my team the autonomy to lead, and execute exceptional guest service. These are just a few examples of the formal and informal mentoring that I’ve received throughout my career. The message is to keep eyes and ears open for role-modeled behaviors and knowledge that will aid in your development. Exceptional resources are available for women looking to develop a mentor/mentee relationship. Global Gaming Women’ site, www.globalgamingwomen.org, is a tremendous source of information. It is also where you may sign up to attend Global Gaming Women events. Also on the site are the one-minute Coffee Break segments where executive women from the gaming industry share stories and advice with all of us. Another terrific resource is Global Gaming Network, www.globalgamingnetwork.org, which is an online mentor/mentee match network that pairs mentees and mentors. Additionally, the Annual Women’s Leadership Conference, presented by the MGM Resorts Foundation, will be held August 6-7 at the MGM Grand Las Vegas, offering a forum to promote women’s personal and professional development and advancement. A good mentor is a teacher or someone that supports your development and is willing to share the tools that helped them succeed. More importantly, it would be someone that cares about you enough to give you candid, honest feedback. A great mentor will disclose the mistakes she made along the way, her career setbacks and failures, and share how she overcame those challenges. For me, mentoring is not only a way to pay it forward for the help I’ve received along the way,; it’s truly a rewarding experience. Through mentoring and the exchange of ideas with mentees, I continue to learn and develop my own skills. Mentoring is truly a twoway street.

*Approved in New Jersey for interactive gaming.

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NEW GAME REVIEW by Frank Legato

Exotic Princess Konami Gaming

his is one of the first games in a series Konami calls “Reeleven,” as in 11 reels. The first two reels of the game screen are traditional reels; that is to say, all of the virtual stops of the game’s program are included, with three stops displayed. The remaining three reels displayed are actually nine reels, each displayed in the space of a single symbol, each with all stops in the program represented. This gives game designers the ability to create some unique game-play features. In Exotic Princess, a 40-line game, it is a random feature that replaces all the symbols on the first two reels with a single symbol—the woman, jewel, horse, snake, bag, perfume or one of

the poker symbols. The woman symbol is wild. When the random feature is triggered, five free games are awarded with the single symbol locked on the first two reels. There is a feature within the feature: When coin symbols appear on a free spin, the symbol occupying the first two reels is “upgraded” to the wild woman symbol. One coin symbol upgrades the first two reels to wild reels for one spin; two coins turn them wild for two spins; three coins make the reels wild for three spins. One more feature within the feature: If the symbol occupying the first two reels appears on any of the other three during a free spin, that symbol is locked in place for the remaining spins. The free-spin reels contain different symbols than the primary game. During the free spins, any three heart symbols trigger an additional five free games up to a maximum of 20 free spins. Manufacturer: Konami Gaming Platform: KP3 Format: Eleven-reel, 40-line video slot Denomination: .01 Max Bet: 2,000 Top Award: 25,000 Hit Frequency: Approximately 50% Theoretical Hold: 4%-12.9%

Peacock and Dragon

Alto Gaming / Casino Technology

ulgarian manufacturer Casino Technology, in collaboration with U.S. supplier Alto Gaming, combines ancient mythology and modern technology in an innovative series of progressive Asian-themed games based on Chinese symbolism. Tailored with extreme attention to detail and featuring exceptional HD graphics, the first of the new titles in the series, Peacock and Dragon (the second, coming soon, will be called Five Blessings) provokes the imagination with an attention-grabbing visual performance and intriguing story line. Both games will be released as single offerings, and will be available in both international GLI-11 and Macau GLI-13 versions. Players can choose between a variety of languages, including Mandarin Chinese. The unique concept offers a four-level standalone or linked progressive “8 Peacocks” jackpot with an innovative math model. A combination of special symbols triggers a bonus screen triggering one of the four different jackpot levels—Mini, Minor, Major or Grand. Once within this bonus, a win of one of the levels is guaranteed, making this feature especially attractive for players.

Global Gaming Business JUNE 2014

Manufacturer: Alto Gaming/Casino Technology Platform: Tough Fighter Format: Five-reel, “Turbo” video slot Denomination: Operator-configurable Max Bet: 388 Top Award: 10,000 times total bet Hit Frequency: Approximately 50% Hold Percentage: 7.66%— 11.8%

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The Rolling Stones Aristocrat Technologies

ock-star slot machines have been all the rage of late— bands from the Monkees to KISS to Michael Jackson to ZZ Top have been featured on the reels of various manufacturers over the past few years. With this game, Aristocrat takes on what many consider the granddaddy (literally) of them all, the Rolling Stones. The Rolling Stones slot machine uses an immersive setup including booming high-end audio through a surround-sound “iChair,” band concert footage on an interactive LCD screen, and bonus events with familiar themes to convey 50 years of the “Greatest Rock Band in the World.” The base 40-line game uses a

Royal Roses

six-reel setup, with four spaces per reel, The game is featured on Aristocrat’s new Viridian WS Feature Top Box cabinet, with bonuses featured on an oversized vertical LCD. Each of the four official band members of the Stones—Mick Jagger, Keith Richards, Charlie Watts and Ronnie Wood (for some reason, former band members like founder Brian Jones and bassist Bill Wyman were left out) appear as reel symbols and bonus icons. The band’s music and culture are wrapped into several bonus features, with both random events in the base game and several free-game, wheel-based and picking bonuses. On any primary game spin, “Wild Licks” can randomly appear, replacing various symbols on the screen with the famous Stones tongue logo, which serves as the wild symbol. Triggering all of the main bonuses is the “Rock ‘N’ Roll Steel Wheel,” a wheel bonus spin resulting in a credit prize, “World Tour Picks” or “Start Me Up! Free Games.” In World Tour Picks, the player picks from “Lick” symbols—they are “tongues from around the world”—for credit prizes or band members. If all four band members are revealed, the player wins all the prizes on the board, plus a bonus band-member pick. In the Start Me Up! Free Games bonus, seven free games are awarded, with a twist—the game screen expands from a 40-line, four-by-five field to an 80-line, 10-by-five field on the top screen. Manufacturer: Aristocrat Technologies Platform: Viridian WS Format: Five-reel, 40-line video slot Denomination: .01, .02, .05 Max Bet: 250 Top Award: 1,000 times line bet Hit Frequency: Approximately 50% Theoretical Hold: 4%—14%

Multimedia Games

his new game in Multimedia’s High Rise series features an eight-level ladder of progressive jackpots that is climbed thanks to a unique use of wild symbols. The base game is a five-reel (four spaces per reel), 40-line video slot featuring frequent stacked symbols and stacked wild symbols. When three or more bonus trigger symbols land scattered on the reels, 10 free spins are triggered. Additional stacked wilds are added to the reels for the free spins. There also is a picking bonus, triggered with bonus symbols on the first, third and fifth reels. A rose bush appears on the screen, and players are prompted to “pick” roses from the bush until a bouquet of five roses is formed. Along the way, roses either award bonus credits or a “leveling up,” which produces more roses worth more credits. A maximum of 3,400 credits is possible in the bonus if all level-up symbols are uncovered. The progressive bonus is activated at max bet. When the bonus is active, when five or more wilds appear on the screen that do not contribute to a win on any payline on the reels, 52

Global Gaming Business JUNE 2014

they become “2nd Chance Wilds,” which correspond to the progressive jackpots on the top-box ladder. The eight progressives range from a reset of $20 for five 2nd Chance Wild symbols to the top jackpot, resetting at $2,000, for landing 12 2nd Chance Wild symbols on the 20-space reel screen. Manufacturer: Multimedia Games Platform: MGAM Operating System Format: Five-reel, 40-line video slot Denomination: .01, .02, .05 Max Bet: 200 Top Award: Progressive; $2,000 reset Hit Frequency: Approximately 50% Theoretical Hold: 2.1%—14.94%

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KING T WEATHE With an upsurge in popularity, table game technology becomes more important By Dave Bontempo and Frank Legato

hree words have traditionally described the most urgent needs of the table-game technology market: tracking, utility and security. Lately, advanced technology in the pit has enhanced the games themselves as well. Vendors in these areas target a lucrative, but changing market. Casinos want improved production as stiff competition makes tracking systems more essential, utility segments more vital and security more important than ever. At the same time, technological advances are beginning to take table game play way beyond the traditions of green felt.

A Lucrative Shuffle Las Vegas-based Bally Technologies wasted no time “shuffling” its lineup. The company’s ambitious $1.3 billion acquisition of SHFL entertainment last year—the largest ever in its 81-year history—led to hardware and software table-game rollouts. The most recent involved the debut in late May of Infinilink, software that essentially connects apples and oranges and should fit perfectly in the heavily populated Macau market. “This enables games with a different math model to feed in and draw from the same jackpot,” says Roger Snow, senior vice president of table and utility products for Bally Technologies. “This is going to be an absolute gamechanger for us and the industry. Casinos will be able to hook up all of their specialty games, regardless of model, and feed a single jackpot. You can be playing 3 Card Poker, your wife might be playing Texas hold ‘em and if you look up, you can see the same jackpot.” Games featuring the Infinilink progressive play the same as they always have, except that when the progressive wager is made, it qualifies for normal and Infinilink payouts. A portion of that wager is credited to the Infinilink meter. The hands and rounds selected for Infinilink payouts are random. Players who make a progressive wager during one of these randomly selected rounds and hit the randomly selected hand win both the regular and Infinilink payouts. Infinilink appears to be a sound offensive strategy to enhance jackpots. Products unfurled by Bally Technologies at London’s ICE Totally Gaming show in February, meanwhile, loom as preventative medicine. They speed up

Global Gaming Business JUNE 2014

play, eliminate costly jams and bolster the less-glamorous aspects of the casino floor. This lineup includes the ChipStar roulette chip sorter, the iScore double-sided display at over 60 centimeters, the MD 3 blackjack and baccarat card shuffler and the DeckMate 2 poker room card shuffler. Rounding out the group is Shuffle Flex technology, which lets operators on underutilized tables enjoy a novel pay-by-shuffle concept. Snow was at the forefront of several SHFL entertainment table-game innovations before Bally Technologies acquired his company. He invented and gained patents on numerous games. While understanding a product’s “wow factor,” Snow also respects the less-flashy “not now” factor. As in, this product can’t jam, not now. “A lot of our innovations were unsexy; that’s kind of the way it is with shufflers, chip sorters and shoes, etc.,” he says. “They don’t turn anyone on. Heck, chip sorting is about as utilitarian as anything you will ever find. But operators don’t care about how it looks; they are concerned with how it works. “Operators tell us to solve a simple problem. They want a product that gets rid of the jam. It doesn’t have to make coffee and it doesn’t have to shine their shoes. With the chip sorting, you know how it is with the technology inside of a normal one—the darn thing jams up on you, and that’s very expensive. “Well, we actually do have some sexy technology with ChipStar. It presorts the chips before they merge onto the conveyor belt. It makes sure there isn’t a big pileup. It eliminates the jamming. Look, roulette is slow enough as it is; the game doesn’t need anything else to become slower,” he laughs. Shuffle Flex is another functional, solid enhancement. “Let’s say you have a shuffler that is only in use for eight hours on a Saturday night,” Snow says. “You don’t want to pay for a new shuffling machine that is rarely utilized, but Shuffle Flex technology enabled us to put a module on any shuffler. You can pay a certain amount for usage. It’s like pay-per-view.” Some “views” on other products are eye-catching. In the Asian market, for example, i-Score is a visually pleasing tracking system and display for baccarat, tailored to a specific audience. “It is unlike what anyone else has ever done,” Snow says. “The graphics

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“We actually do have some sexy technology with ChipStar. It presorts the chips before they merge onto the conveyor belt. It makes sure there isn’t a big pileup. It eliminates the jamming. Look, roulette is slow enough as it is; the game doesn’t need anything else to become slower.”

Bally ChipStar

—Roger Snow, Senior VP of Table and Utility Products, Bally Technologies

resonate well with the Chinese players. The i-Score display has a great look about it, with dragons, and it is mounted. We had our own design studio in Asia come up with it.” DeckMate 2, meanwhile, has been upgraded from what Bally Technologies considers one of the best shufflers ever built. The new model shuffles in 22 seconds, has a fifth-iteration card recognition system, a built-in timer to “call the clock,” a remote touch-screen display and the ability to work with all card types and brands. It can also sort cards back to a spaded deck. The MD 3 features card recognition that can read and verify every card being shuffled, upgrading the level of security to multi-deck tables like blackjack and baccarat. Its platform and gripper system counts and shuffles up to eight decks of cards quickly and alerts the dealer of missing or added cards.

Managing the Table International Game Technology has always been known for its games and systems on the slot side, but lately, IGT’s pit offerings have multiplied as well. The latest player is Lucky Chip, a bolt-on product to accompany Table Manager, its longtime automated software system that maximizes rating accuracy, increases productivity, and delivers promotions to table players. Table Manager is installed in over 125 worldwide locations, and has a track record of several years. Lucky Chip creates mystery bonuses for table-game players. It is modeled after Lucky Coin, which cultivates loyal players by offering a property-branded, pool-based mystery jackpot guaranteed to hit by a certain level, regardless of game outcome. Operators use Lucky Coin to offer mystery jackpot promotions on a single machine, across a bank of machines, and to create floorwide, player-funded jackpots branded to their property. Lucky Chip, which debuted at G2E Asia in 2013, has opened to sparkling reviews in Macau, according to Matthew Hiu, IGT’s senior product manager for systems products. “Lucky Chip creates a mystery bonus,” Hiu says. “Think of slot players

first. Every time a handle is pulled, a certain portion of the coin-in is set aside to a progressive mystery jackpot. When the collective jackpot meets its threshold, the system finds an eligible person from all the slot players and picks a winner. “Take that same engine and apply it to a card player. What is the equivalent of a slot machine? A seat at the table. For players, Lucky Chip creates this exciting mystery jackpot because it does not require an additional side bet. Normally, over the course of time, numerous side bets for a jackpot will have a dilutive effect for your wagering. “With Lucky Chip, you don’t have to do anything. As long as you are a carded player, you can be having fun, doing your normal thing, and can be the benefactor of a mystery jackpot without having to pay for it.” Hiu says MGM Macau has used Lucky Chip both for frequent smaller bonuses and “life-changing pots” of more than US$1 million. “Most players would rather have a more frequent, higher-paying probability with a smaller win than the infrequent big win,” he asserts. “Now you can do both. An operator can create multiple pools and target to certain needs.” Even the table games can be singled out. “Let’s say blackjack is down on a Tuesday,” he says. “You can create a Tuesday pot for blackjack.” Hiu says MGM utilizes 400 tables. Other operators can tailor their tablegame capacity to the jackpot. MGM brands the Lucky Chip as a Golden Chip. The name can also be changed to a property’s liking, he says. “We are going through the regulatory approval process in many places, and we expect to roll this out in great numbers in 2014 and 2015,” Hiu says. JUNE 2014 www.ggbmagazine.com

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One table system innovation that debuted at G2E Asia is Gaming Floor Live Baccarat, a real-time “game optimization tool” designed to maximize performance and profitability in table games. The system delivers instant access to information like dealer performance by tracking the speed of each hand dealt and the accuracy of results.

Operators can use it to increase carded play and drive trial play, he adds. IGT’s popular Table Manager transforms the process of rating and comping table-games players into a more simple endeavor. Table Manager enables automated player rating, drop, head-count, markers, comp issuance and table accounting transactions. Key features include wireless-compatible touch-screen player tracking and real-time floor management, progressive jackpots for table games and comprehensive reports sorted by game type, pit, shift, date, time, etc. This reduces operating costs by eliminating most traditional “pencil-topaper” tasks, increases productivity by requiring fewer personnel per table to focus on players and maximizes profits with precisely allocated marketing and comp dollars. Table Manager captures true game handle and player betting patterns to appropriately reward higher and lower-tiered customers.

TCSJohnHuxley’s Sicbo Blaze

Track the Game, Improve the Game London-based TCSJohnHuxley offers what is arguably the most diverse range of table game products in the industry, and as such, the company’s expertise runs the gamit from tracking play to new high-tech play features that redefine the table game experience. The company’s lineup for last month’s G2E Asia trade show provided a prime example of the scope of improvements being made in the pit. “At last year’s G2E Asia we spoke about our investment in product, people and infrastructure,” said Cath Burns, TCSJohn Huxley Group CEO, before the Macau trade show. “This continues for 2014, with our main focus being on customer-driven innovation and commitment to develop key products in our range. Our enabling technology innovations are already delivering solutions to customers across the globe.” One table system innovation that debuted at G2E Asia is Gaming Floor Live Baccarat, a real-time “game optimization tool” designed to maximize performance and profitability in table games. The system delivers instant access to information like dealer performance by tracking the speed of each hand dealt and the accuracy of results. A module called Pit Visibility with Table Alerting and Reporting increases security by providing surveillance views of all tables, alerts and incidents as well as complete floor optimization with back-of-house reporting. All this is available on an open platform that can interface with existing systems, if required. TCSJohnHuxley’s innovations go from the back of the house to the 56

Global Gaming Business JUNE 2014

front with the Supernova Progressive Platform, featuring a new baccarat game. The system features floor-wide events and mystery progressives, and a flexible platform that adapts to almost any table game. Operators can configure as many prizes and jackpots as they want. On the individual game side, the company’s Sicbo Blaze launches an innovative gaming surface technology, featuring game animations projected through a traditional gaming layout. For added game security, all winning bets and game sequences are highlighted and standard gaming layouts cover the complete table surface, instead of the traditional acrylic playing surface. The flexibility of the system allows casinos to include their own graphics and branding if required. Blaze gaming surface technology will be rolled out in the coming year to cover a full range of table games.

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Detection and Protection Gaming Partners International is a leading provider of casino currency and equipment worldwide, with offices and manufacturing facilities in the Americas, Europe and Asia. The company recently acquired GemGroup Inc., a privately held manufacturer of casino currency, cards and table layouts sold under the Gemaco brand. The companies anticipate closing by the end of June. When the deal was announced in March, GPI’s president and chief executive officer, Greg Gronau, said it strengthens his company’s card-manufacturing capabilities and increases U.S. market share in playing cards and table-game layouts. He said it further expands GPI’s Asia-Pacific lineup because Gemaco has a strong market presence there. While awaiting the closure of its acquisition, GPI pioneers the latest innoGPI pioneers the vative gaming currency security features. They are designed to safelatest innovative guard casinos against would-be coungaming currency terfeiters and internal theft. security features. An important feature of the company’s new currency-security advance is They are designed quick gaming-table chip validation by to safeguard dealers and staff. Its Paulson Value casinos against mold has the chip’s denomination embossed into the mold, providing visual would-be and tactile authentication while makcounterfeiters ing it harder to counterfeit lower-deand internal theft. nomination chips into higher denominations. GPI has added two new security options on chip decals. 4C-UV is an invisible chip authentication tool that is revealed by a standard UV detector, and offers operators the ability to incorporate a unique full-color image or pattern into their chip decals for quick currency authentication at the table. Another decal security feature is the new SecuriFilm. It is a security film with a transparent hologram-like effect that enables quick dealer authentication. Not only does this offer a quick, visual chip validation tool, but it also enhances the visual appeal of the decal. Customers can choose between two standard designs or a fully customized design. For operators concerned about potential internal theft by employees, GPI offers the new EM Detection and Chip Detection. Both help deter unauthorized attempts to remove currency from the casino property. EM Detection provides an additional level of anti-theft protection, as an alarm will sound if EM-enabled chips are detected as they pass through security gates or are revealed by hand-held security paddles. Operators can now combine both EM Detection and high-frequency RFID tags into their currency. The combination of these security features provides protection against internal theft while still enabling quick validation with RFID. Chip Detection is a stand-alone solution that helps detect RFID currency concealed within an employee’s purse, wallet, coat or other personal items. It provides an unobtrusive solution to protect against unauthorized removal of gaming currency from the property by casino staff. The Chip Detection unit can be located at or near employee entrances or exits. Scans are non-intrusive and do not interfere with employee productivity. Whether it’s protecting the games, tracking the play or re-defining table-game play, one thing’s certain: Technology has definitely arrived in the pit.

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EMERGING LEADERS YOU NEED AN AGENCY

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Moving up the Ladder David Lopez CEO, American Gaming Systems ne quick look at David Lopez’s resume and one can see that he is a highly successful gaming professional with an impressive roster of positions held over the past 16 years. His journey began with an entry-level position at Shuffle Master after the former senior VP of marketing at the Stratosphere, Tom Willer, insisted that he should take the position. “I guess I had no choice,” Lopez jokes, “but it was a good order to follow!” In the beginning, Lopez admits, he didn’t know a lot about the industry, and felt threatened by colleagues who seemed to know more. By surrounding himself with some very smart and open individuals, however, he quickly came to discover his path for success by being a part of a great team, rather than by trying to be the strongest individual in a given group. Lopez used his passion for listening and learning from those around him to quickly filter out his weaknesses and discover the strengths that have helped him advance his career. Whether formal or informal mentors, these include industry professionals such as Joe Lahti, Mark Yoseloff and Gavin Isaacs, to name a few, as well as his own mother, who was his first on-thejob mentor running their family business back in Troy, New York. Over the years, Lopez’s hard work and focus have paid off in the form of multiple promotions and various executive career opportunities. These steps have led him to his current position as CEO of slot manufacturer American Gaming Systems. Lopez is now immersed in AGS, and is looking forward to taking what he’s learned over the years and working with the team to help grow the company. “AGS is a great fit for me,” he says. “A small, entrepreneurial and nimble company with a whole lot of white space in front of it—it’s exciting to be at a company that’s on the upswing.” With this new endeavor at AGS, Lopez continues to show plenty of potential for more accomplishments and milestones into the foreseeable future. This extends not only to him but to other young professionals, as he believes

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the culture at AGS is a great environment for new leaders. “We are small, and all geeked up as an organization here at AGS,” he laughs. “This is the most fertile ground for emerging leaders. We want to give our people as much authority as they are willing to take.” In that vein, Lopez has seen a shift in the industry with companies becoming more open to taking chances on less experienced employees who have shown a strong desire to advance their careers. This includes AGS and companies like it, which have become the epicenter of opportunities for emerging leaders. “I don’t believe this was always the case,” he says, “but the next generation of execs is younger and hungrier than ever.” He then joked about getting older himself and quickly noted that these types of professionals serve as motivation to keep him at his best. In fact, Lopez has tried to pay it forward by serving as a mentor to other young professionals. He has put in the extra time to coach, listen to, and encourage those around him. “I think as executives, listening creates the foundation for the relationship where mentoring and personal growth can take place,” Lopez says. Overall, if he could offer any advice from his experiences throughout his career it would be to always be a team player and know that through that experience leadership will manifest from somewhere inside. “As the late (former Shuffle Master President) Tim Parrott said: ‘Keep your head down, do your job and grab an oar, because we are all in this together.’” —Renese Johnson, The Innovation Group

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The Show Must Go On Mike Johnson Industry Vice President for Global Gaming Expo, Reed Exhibitions ike Johnson had a rude awakening upon joining the workforce. After graduating from the State University of New York College at Fredonia in May 2001, Johnson put his natural “people” skills to work in the sales department for Reed Exhibitions. “Four months later, 9-11 took place and literally changed the world with me in it,” he says. “That one event showed us the best and worst of humanity and leadership. I knew I had natural leadership characteristics, and I was determined to use them. I just didn’t quite know how.” Today, he’s found the way. His role as industry director for Global Gaming Expo encompasses the casino gaming portfolio for the world’s leading event organizer, Reed Exhibitions, in partnership with the American Gaming Association. In this capacity he is responsible for the overall strategic management of G2E and G2E Asia, the largest international casino gaming trade shows and conferences on either side of the world. Johnson learned early in his career (particularly in sales) about the importance of listening as a key to communication. These characteristics have served him well and, coupled with a passion to excel, have allowed him to develop the best products and solutions for customers and find the best innovations to challenges. He has always shown an innate ability to lead people by example, make good decisions, deliver positive results, and employ a company-first attitude. Johnson credits the many influences and experiences he has had throughout his 13-year career, and has been able to apply and incorporate those lessons into his management “tool box.” Among the examples he has picked up from others is his belief in strong relationship management with customers, and an inclusive management style with employees. Additionally, he has a strong awareness of politics and the importance of valuing cultural nuances when managing an international portfolio. “As the world’s largest event organizer, we have resources that many of our competitors do not, including some great management training programs,” says Johnson. In bringing industries together, employees of

“I especially enjoy moving the needle for people and helping them understand new innovations in technology and processes which in turn help their businesses grow.” Reed Exhibitions also get to meet many of the key players driving innovation across the industries they serve, which allows for emerging leaders to thrive and advance, and in turn has been very rewarding for Johnson on the gaming side. “Being co-managed by the American Gaming Association, and sponsored by the Association of Gaming Equipment Manufacturers and others, it’s also very rewarding to know your work is directly impacting the industry you serve,” he says. As the show manager for G2E, Johnson says he is honored to support the Emerging Leaders program, which recognizes innovation and commitment in younger employees. He believes the most valuable asset in any organization is its people. Johnson sees the value in networking and building relationships, and enjoys recognizing and fostering those relationships with the future movers and shakers of the industry. “I especially enjoy moving the needle for people and helping them understand new innovations in technology and processes which in turn help their businesses grow,” he says. Johnson says he is excited to continue serving the industry and bringing everyone together across the G2E portfolio. Fresh off his first big 2014 gaming event at G2E Asia, he says he’s now gearing up for the big show, G2E, at the end of September. —Joe Dimino, The Innovation Group JUNE 2014 www.ggbmagazine.com

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FRANKLY SPEAKING by Frank Legato

Brawlin’ Billionaires

Global Gaming Business JUNE 2014

RINAL DO

Anyway, as of press time, we were still waiting for the next salvo in this rich-guy spat. Meanwhile, the other rich-guy brawl involved Sheldon Adelson and… Oh, take your pick. He’s been making various people mad, but he went on Bloomberg TV himself last month (what’s that, the Mogul Network?) and basically said none of his peers in the casino industry are at his level of magnificence. Aside from Wynn, he said, the other casino chiefs are “not entrepreneurial” like him. “They’re following me,” he said. He also told the interviewer he “may have flunked Diplomacy 101.” True dat. V IC TOR

s an expert on slot technology, and as someone who has studied the supply sector of the gaming industry and analyzed various casino markets, I believe I have earned the right to use my qualifications to enlighten readers of Global Gaming Business on the following subject: Rich guys fighting. In Sydney, Australia, one of those fights went beyond name-calling. Casino mogul and ultra-rich guy James Packer and TV network boss and just-plain-rich guy David Gyngell got into an actual street fight, throwing punches and wrestling around on the ground. Just so you know, I think it’s perfectly acceptable to get into a street brawl on the way to board meetings, network strategy sessions, ribbon-cuttings and the like. It breaks up the humdrum nature of the work week. Sometimes, after a meeting, I’ll just go out into the hallway and throw a right cross at the first guy I see. Gyngell even went ninja on Packer: He fought him barefoot. The next day, Packer showed up at the airport with a black eye, so it must have worked. The media reports were unclear on what caused the two onetime roommates to engage in fisticuffs on a public street. From what I can gather, Gyngell, the millionaire, called Packer, the billionaire, a “poopy-head,” after which Packer responded that Gyngell was a “booger-face,” and things went downhill from there. Meanwhile, back in the States, our homegrown casino moguls were engaged in fights of their own. One interesting spat is an ongoing war of words between Steve Wynn and actor George Clooney. It all started when Clooney was among nine people at Wynn’s Encore hotel, at a dinner hosted by Wynn in the Botero restaurant. According to Clooney, after Steve complained about Obamacare, Clooney told him the president is his longtime friend, to which Wynn responded, “Your friend is an asshole.” Well, Clooney told Steve that he was the a-word, and left in a huff. According to Wynn’s version of events, Clooney was plastered from drinking tequila, and had a hissy-fit. “Clooney’s fun to be with when he’s sober,” Wynn told the Las Vegas Review-Journal. “If you have a chance to drink with him, you want to get there early, and don’t stay late.” Unfortunately for me and this column, it didn’t escalate into a street brawl like the Packer thing. (But just for the sake of argument, I think Clooney could have taken him.) Ah, but things didn’t end there. Talking about the spat on Bloomberg TV’s Market Makers, Wynn attributed the whole thing to the culture of celebrity, saying actors like Clooney are “mollycoddled.” Yes, evidently, the affair somehow sent Steve back to the 19th century. He also said Clooney was a “rathscallion” and a “ragamuffin” who was “well over the bay” with tequila, and likely tied up with Tammany Hall. Seriously, though, Wynn said that “artists, actors and people like that” live in a “very strange bubble of their own. They’re mollycoddled, they’re highly privileged. We’re talking about successful artists like George, or Barbra Streisand…” Hey, why bring Babs into this thing? Wynn went on to say artists live in a “relatively small world,” with people around them who are “very solicitous and caring for them.” (Then, he had his servants draw a bath in his solid-gold tub.) Clooney, of course, shot back, issuing an actual, official statement, saying how it was Wynn who lived in a bubble, and how he (Clooney, that is) worked in “tobacco fields and in stock rooms, and construction sites” and was broke for more of his life than he was rich (well, except he got to stay with his Aunt Rosemary for a while), and how Steve should be congratulated for being one of the richest men in the world, but “he needs to take off his red sparkly dinner jacket.” OK, now I think I’ve slipped back into the 19th century. Do people still wear red sparkly dinner jackets?

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CUTTING EDGE by Frank Legato

Innovation Meets Sustainability Product: Sustainable Apparel Collections Manufacturer: Cintas Corporation

eliminates harsh chemicals often used in the dry cleaning process. Cintas also recently introduced the AR Red Suiting Collection, which features DuPont Sorona, a plant-based fiber made with renewable, naturally occurring starch. Garments made with Sorona are soft, strong and they dry quickly. Sorona also helps fabrics stretch comfortably, stay wrinkle-free and retain their shape. Cintas is committed to creating apparel programs that not only feature runway-inspired design, but also provide customers unique ways to reduce their carbon footprint. In 2013, the environmentally friendly collection helped divert the equivalent of 19 million 16.9-ounce plastic bottles from entering landfills. To support the growing demand for sustainable materials, more than 20 percent of Cintas products offered to the gaming industry are eco-friendly. This increase can be attributed to an invigorating response from the Go Green movement, and shows that customers are requesting greener technology more than ever. For more information about Cintas’ green initiatives and technologies, visit www.cintas.com/green or call 1-800-UNIFORM.

mericans throw away more than 2.5 million plastic bottles every hour. To help gaming organizations meet their sustainability goals, the award-winning, environmentally friendly uniform collection by Cintas uses an innovative plastic-to-fiber process to make an array of eco-friendly garments including suiting, shirts, slacks, housekeeping garments and even tuxedos. In just one suit, approximately 25 plastic bottles are diverted from the waste stream. According to the U.S. Environmental Protection Agency, manufacturing products made from recycled plastic requires 66 percent less energy, reduces water use by 90 percent and helps eliminate harmful carbon emissions. In addition, many of the garments can be home-laundered, which saves energy and

The Next Big (Payment) Ticket Product: Prepaid Gaming Cards Manufacturer: Sightline Payments

ashless gaming is becoming a reality that will improve patron convenience and operator efficiency. By 2015, it has been estimated that fewer than 10 percent of all retail transactions will be conducted in cash. The rest are electronic, based on plastic cards or, more recently, mobile devices. Primarily due to responsible gaming concerns, regulations have generally prevented casinos from acting like retailers and accepting credit and debit cards. These regulations are changing. In February, the Nevada Gaming Commission made a significant policy change, for the first time allowing a modern payment instrument to be used to fund gaming play. Sightline Payments, a Las Vegas affiliate of Vantiv Gaming Solutions, worked with Nevada operators and regulators for more than two years to develop a prepaid system and the new regulations that allow for its use in casinos. When a patron opts for a gaming prepaid card, they are opening an account

Global Gaming Business JUNE 2014

with the bank that issues the card. Money deposited is protected by FDIC insurance and the card benefits from federal loss and fraud protections. Patrons can fund their account online via a transfer from their bank account or from a credit or debit card, or a mobile app. From the wagering account they can electronically move funds to and from gaming devices. The prepaid system matches the patron’s player card number with the prepaid account number, so the patron doesn’t alter the usual gaming routine. The prepaid account comes with a card that resembles any other debit/credit card, but carries the casino’s brand and logo. It can be used at any merchant in the U.S., or online, where the card is accepted. Once a patron finishes gaming, the funds are sent back to the prepaid account. This gives casinos a powerful new way to market to patrons, knowing customers’ purchasing habits outside of the casino. It also allows patrons to use one sole account to fund both online play and brick-andmortar play, keeping the user experience consistent. Nevada is the first state to make this significant change. It is likely that other states will soon follow suit and allow cashless gaming. For more information, visit sightlinepayments.com.

The iGaming domino effect

strategies: tactics: timing

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GOODS&SERVICES MULTIMEDIA TO ACQUIRE POKERTEK

ARISTOCRAT LAUNCHES HELIX CABINET

ustin, Texas-based slot manufacturer MultiA media Games is acquiring PokerTek, Inc., the producer of automated table games featuring the

lot and system manufacturer Aristocrat TechSnologies announced the launch of the Helix slant-top cabinet, an ergonomically de-

PokerPro multi-player electronic poker game. PokerTek also produces automated multi-player blackjack and baccarat games. Multimedia is paying $1.35 per share in cash for the acquisition. Multimedia CEO Patrick Ramsey announced the transaction, for which the company spent $13 million, as part of the slot-maker’s quarterly earnBally ings announcement. In adTechnolodition to adding PokerTek gies Presirevenue dent andthat was $5.5 milCEO over the past year—85 lion percent of which came from recurring-revenue deals with casinos—Ramsey noted that the transaction gives Multimedia an instant Multimedia Games CEO Patrick Ramsey entry into the Macau gaming market. “This proposed transaction represents an excellent opportunity for Multimedia Games to expand our product portfolio,” Ramsey said in a statement. PokerTek’s board of directors unanimously approved the merger agreement with Multimedia Games, and has recommended that the company’s shareholders adopt the merger agreement. Assuming the satisfaction of conditions and regulatory approvals, the transaction is expected to close by the end of the year.

WMS TOPS SWEDEN SUPPLIERS MS Gaming announced that Casino CosW mopol, a wholly owned subsidiary of stateowned Swedish operator Svenska Spel, has released the final results of its tender for slot machines, with WMS winning 30 percent of the total order size, the single largest share awarded in the tender. Casino Cosmopol, which has casino properties in Stockholm, Gothenburg, Malmo and Sundsvall, currently operates approximately 125 gaming tables and 1,100 slot machines, with slots accounting for about 60 percent of its net gaming revenue. The WMS Blade cabinet and the Game Chest Multi-Game Series, specifically tailored to 66

Global Gaming Business JUNE 2014

Stockholm’s Casino Cosmopol has been re-equipped with many games from WMS Gaming.

the European marketplace, are among the WMS products to be featured at Casino Cosmopol. The Wizard of Oz Emerald City and Haunted Forest themes on the player-favorite Gamefield xD cabinet are already in operation at the Cosmopol casinos. Eight gaming companies submitted tenders for the deployment of slot machines to the four Cosmopol Casinos; WMS and five other companies were awarded contracts.

CADILLAC JACK ANNOUNCES SHIPMENTS maya Gaming Group announced that its A subsidiary Cadillac Jack has entered into multiple agreements to ship approximately 1,100 gaming machines to both existing and new customers in the United States. Installation of the machines is anticipated to occur in the second quarter of 2014. The shipments are primarily comprised of outright sales of gaming machines as well as upgrading existing revenue-share gaming machines. The majority of units shipped will be Class II machines, but will include sales of Class III machines in both Oklahoma and California. “We are very happy to extend and improve our relationship with longstanding customers in the United States as well as create relationships with new customers,” said David Baazov, CEO of Amaya. “Additionally, we are excited about continuing our expansion of land-based solutions into Class III gaming markets, which we have identified as a strategic growth opportunity for us since our acquisition of Cadillac Jack.” The company also announced it has received a license to provide its land-based solutions to Class III gaming operations in Wisconsin.

signed cabinet with enhanced technological capabilities. The cabinet can host any game from the Aristocrat Gen7 library. “At Aristocrat, we have transformed the game, and Helix is the cabinet that redefines the category for the entire industry,” said Aristocrat Chief Product Officer Rich Schneider. “It is a direct result of our dedication to bringing creative solutions to operators along with the world’s best content to players by way of the depth and breadth of our portfolio.” The cabinet features two floating LED HD displays with frameless, infinity edges. The 1080p resolution integrates pinstripe lighting and immersive rear surface ambient lighting. Helix’s crisp visuals are paired with a quad sound package including a subwoofer. A champagne nickel trim resists fingerprinting. The Helix Slant comes standard with dual Infinity Edge HD 23-inch LCD monitors. The Helix Super Screen Slant has a floating 23-inch Infinity Edge HD monitor and a 32-inch floating Infinity Edge HD LCD top monitor.

CROMWELL PICKS JCM CM Global announced that it is providing bill Jflooracceptors and cash boxes for 100 percent of the at the Cromwell Las Vegas, the new boutique hotel casino at the site of the former Barbary Coast and Bill’s Gamblin’ Hall on the Las Vegas Strip. The Cromwell is using JCM’s award-winning iVIZION and UBA bill validators. Additionally, the drop process is managed by JCM’s ICB Intelligent Cash Box. The Cromwell is the first Las Vegas property owned by Caesars Entertainment to implement ICB technology. “This is an exciting time in Las Vegas, and we are very excited to be a part of this incredible new property,” said Mark Henderson, JCM Global’s vice president of worldwide sales. “The Cromwell sought out the very best for its guests in room product, dining options and nightlife. Our awardwinning iVIZION, UBA and ICB fit in perfectly with that mix and bring better, smarter, faster transaction solutions to the Cromwell.”

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BALLY SIGNS SYSTEM-WIDE DEAL WITH GOLDEN NUGGET aming equipment supG plier Bally Technologies announced that it has signed an exclusive, enterprise-wide system agreement with Golden Nugget, Inc., to supply all five of Golden Nugget’s properties in the U.S. In total, Bally’s systems will be connected to nearly 6,400 slots and table games across four states. Additionally, Bally’s solutions will be customized to be integrated with the Golden Nugget “Select Club” patron-loyalty program Bally’s new at more than 440 restaurants na- Titanic game tionwide, in addition to the five casino resorts. This will enable Golden Nugget to have a singular view of its patrons, no matter where they are dining or playing. “We believe Bally’s robust technology can meet our aggressive goals moving forward and position us best to continue offering a high-end experience at our restaurants and resorts,” said Golden Nugget Chairman, CEO and owner Tilman J. Fertitta. “We are confident Bally is best suited to take our loyalty and tracking programs to the next level, while continuously helping us meet our revenue goals quickly. Bally’s fresh new lineup of game titles will also bring a new level of excitement to our casino floors.” In addition to the Bally systems already installed at the Golden Nugget properties in Atlantic City and Biloxi, Bally will replace a competitor’s systems at the Golden Nugget Las Vegas and the Golden Nugget Laughlin. Bally also plans to install its systems at the Golden Nugget Lake Charles in Louisiana, which is scheduled to open in late 2014. Golden Nugget selected an expansive array of Bally’s system solutions, including SDS, CMP, iVIEW Display Manager (DM), Elite Bonusing Suite, Business Intelligence, Promotional Kiosk, Service Tracking Manager, TableView and CoolSign. Bally has also signed an agreement to provide many of its latest slot games to the properties, including the many new titles featured on the new Alpha 2 Pro Wave cabinet and Quick Hit content on the Alpha 2 Pro Curve cabinet. Among the Bally licensed premium titles to be featured at Golden Nugget properties will be Titanic, The Magic of David Copperfield and ZZ Top Live From Texas. JUNE 2014 www.ggbmagazine.com

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PEOPLE GAMING LEGEND BURTON COHEN DIES

he list of Las Vegas gaming pioneers got shorter last month when Burton Cohen died in his sleep at the age of Burton Cohen 90. Cohen was active in the gaming industry until the end, serving as a board member for MGM Resorts. Cohen arrived in Las Vegas in 1966 as coowner and general manager of the Frontier casino, after building and supervising resorts in Miami. Soon afterward, he worked with developer Jay Sarno to build and operate Circus Circus. Later, he worked at the Flamingo, Caesars Palace, Thunderbird and Dunes. But it is the Desert Inn where Cohen made his name. He managed the property in the 1970s and returned in the 1980s to return it to prominence at the request of his friend Kirk Kerkorian. He retired from active management in 1995, but retained his position with MGM. “Burton was a dear friend and trusted colleague for more than 50 years,” Kerkorian said in a statement. “I am very saddened to learn of his passing and want to offer my heartfelt thoughts to Linda and their entire family. Burt was a special person and I am deeply honored to have known him and called him a friend.”

JULIANO TO HEAD SANDS BETHLEHEM

as Vegas Sands Corporation has squelched months of speculation in the industry and in the press that its Pennsylvania property, Sands Casino Resort Bethlehem, was for sale, announcing a plan to Mark Juliano commit substantial future investment in the property. Putting an exclamation point on its commitment to Bethlehem, LVS announced that longtime gaming executive Mark Juliano will be the new president of Sands Bethlehem. Juliano will take over for Douglas Niethold, who has served as interim president since original president Bob DeSalvio resigned last year to join Wynn Resorts in Massachusetts. Juliano most recently was executive vice president of the operator’s Marina Bay Sands property in Singapore. He has a long history in East Coast gaming operations, having most recently served as

CEO of Trump Entertainment Resorts in Atlantic City. He also was president of Caesars Atlantic City and chairman of the Atlantic City Convention and Visitors Authority. Juliano also served as president of Caesars Palace in Las Vegas.

VALLEY FORGE NAMES PICKUS CHAIRMAN

alley Forge Casino Resort announced its board of managers has named Robert M. Pickus as chairman of the Robert Pickus board. Pickus, who holds more than three decades of executive experience in the gaming industry, has broad expertise in strategic corporate planning, project development and operation, and regulatory compliance. Pickus currently serves as a managing director of GCA Capital Group and as the CEO of its subsidiary, GCA Leisure, providing advisory and management consulting services for the hospitality, gaming and entertainment industries. Previously, Pickus served as an officer of Trump Entertainment Resorts (TER) for more than 25 years, holding key leadership positions, including chief administrative officer, general counsel and corporate secretary. In 2005 and 2010, Pickus coordinated legal and financial advisers to accomplish TER’s successful efforts to restructure its capitalization. Pickus also directed the financing, planning and development for a casino in Gary, Indiana, and negotiated management agreements for a casino in St. Vincent and the Grenadines and a Native American casino near Palm Springs, California.

MGM NAMES COO OF REGIONAL DIVISION

GM Resorts International announced that nine-year MGM executive Anton Nikodemus has been named chief operating officer of the company’s new regional division, with oversight of casino operations in Mississippi, Detroit and the planned Anton Nikodemus projects in Springfield, Massachusetts and Prince George’s County, Maryland. Nikodemus joined the company in 2005, and has served as senior vice president of hotel operations for MGM Grand Las Vegas and Bellagio, president of Monte Carlo, and most recently as

MGM Resorts president of casino marketing. He will work closely with the top officials at the regional properties to accommodate the growth of MGM Resorts in regional markets.

NEW BOSS FOR SYDNEY’S STAR

cho Entertainment group has hired veteran Macau gaming executive Greg Hawkins as managing director of its Sydney flagship, The Star. Hawkins is expected to take up the position in September after getting necessary regulatory approvals, Echo said. He replaces Frederic Luvisutto, who resigned in December. Hawkins served from 2011 until last August as chief executive of Crown Resorts’ Melbourne flagship. Prior to that he was chief executive of Melco Crown Entertainment’s Altira Macau before taking over at Melco’s City of Greg Hawkins Dreams.

GGB

June 2014

Index of Advertisers

Acres 4.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 American Gaming Systems . . . . . . . . . . . . . . .23 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Aruze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 Bally Technologies . . . . . . . . . . . . . . . . . . .2, 51 Casino Arizona . . . . . . . . . . . . . . . . . . . . . . . .53 Casino Data Imaging . . . . . . . . . . . . . . . . . . . .45 Fantini Report . . . . . . . . . . . . . . . . . . . . . . . . .67 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 Gaming Partners International . . . . . . . . . . . .57 GCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 GTECH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 JCM Global . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Konami Gaming . . . . . . . . . . . . .15, Back Cover LT Game . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61 Macquarie . . . . . . . . . . . . . . . Inside Back Cover Multimedia Games . . . . . . . . . . . . . . . . . .11, 63 Ortiz Gaming . . . . . . . . . . . . . . . . . . . . . . . . .31 Red Square Gaming . . . . . . . . . . . . . . . . . . . . .9 RPM Advertising . . . . . . . . . . . . . . . . . . . . . . .60 Spin Games . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Rymax Marketing . . . . . . . . . . . . . . . . . . . . . .43 TCSJohnHuxley . . . . . . . . . . . . . . . . . . . . . . . .59 TMG Consulting . . . . . . . . . . . . . . . . . . . . . . .67 Vantiv . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

JUNE 2014 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Dermot Smurfit Chief Executive Officer, Game Account Network

he online gaming suppliers in the European market in the early part of the 2000s were tempted by big money coming from grey- and black-listed online casinos and poker rooms. Some succumbed to that temptation, but Game Account Network insisted on only dealing with white-listed operations in preparation for the launch of the U.S. market. It turned out to be a great strategy, according to CEO Dermot Smurfit. The company has a partnership in New Jersey with Betfair, and has blazed the social gaming trail in the U.S. by opening a social casino for Foxwoods that has been an amazing success in producing revenue and bringing new and existing players to the property. Smurfit spoke with GGB Publisher Roger Gros at the Indian Gaming trade show in San Diego in May. To hear a full podcast of this interview, visit ggbmagazine.com. GGB: Tell us how your company came about. Smurfit: We’re in year 12 of running the Game Ac-

count business. It really started when my family’s paper and packaging business was taken private around 2000—we got some cash, and we wanted to look at other high-growth industries to build a business. I raised my hand and said, what about online gaming? Back in those days, it wasn’t a very clean business. No, but we took another direction. We wouldn’t do business with bad people or bad companies, and we waited for the market to regulate. Ten years ago there was no meaningful regulation of internet gaming. That led to the “Wild West” days where you just needed a license on some sunny tropical island and you were off and running to crazy profits. Our mission is to provide the tools and technology to land-based casinos in regulated jurisdictions, because the regulators always favor the land-based incumbents. They are the natural equitable inheritors of the market opportunity. As regulation shines a torchlight on these legal jurisdictions, you begin to see the likely probable value over time.

Global Gaming Business JUNE 2014

You’ve been making tremendous progress, not only in the legal online gaming market, but also in the social gaming market, or as you like to call it, simulated gaming. Explain how that came about. The Game Account mission over the last two years has been to build a product capability on top of our real-money system that would enable a land-based casino to reuse what we’ve already built in New Jersey to build a social gaming business, on their own website, accessed by their own existing players. It allows the companies and their customers the ability to explore simulated gaming. Foxwoods has been first to market—we launched in January—and the results are rather astonishing. We’re delighted with the progress Foxwoods has made so far, and we’re confident that business will grow quickly. How does this differ from Facebook applications? Facebook social casinos are effectively games and game applications built on top of the platform that Facebook already offers. They keep 30 percent of the revenues in return for having built this extraordinarily powerful global platform. These are very sophisticated games, but all the financial services aspects are managed by Facebook. This is one end of the internet gaming spectrum. At the other end is real-money online gaming that is going to be very heavily regulated, with ID verification, geolocation, payment processing and more. There’s a lot of complexity. We’re at the midpoint, what we call simulated gaming. And we call it simulated because we’re using our existing, real-money technical capabilities. That means a casino can do with simulated gaming all the stuff they should be doing with real-money gaming—age and ID verification— just as you would in a land-based casino. It’s taken us a long time—more than two years—to get this right, but as Winston Churchill once said, we’ve come to the end of the beginning.

So players actually buy virtual money for real money? Yes, we’ve actually sold billions of virtual dollars for real dollars. It’s quite a fascinating development intellectually that players who find playing games online interesting are willing to pay for extended playing time. Just like at a slot machine, they’re able to spend lots of time on device. And if you, as a land-based casino, don’t serve them, somebody else will. So, how do casinos use simulated gaming to drive customers to the land-based casino? If the player lives within driving distance of the casino, you can message them and offer them some kind of promotion. The landbased casino is the primary mode for the casinos to monetize the customer. Get them to the casino property and they’re going to spend $100 or $200 every time they visit, whatever the number is. In the online casino, you’ll get the purchasing customer for $40. And you’ll get 15 percent to 20 percent of these customers to visit the casino. That’s a very meaningful number, with very high margins. Does the simulated casino go away when realmoney iGaming is approved? We don’t believe it does. Of the thousands of people who have registered at Foxwoods.com, a large number are from New Jersey. They have the opportunity to play real-money games online, yet they decide to play this simulated gaming. And they have exactly the same propensity to purchase virtual currency. So as a consequence, we’ve reached a tentative conclusion that simulated gaming is an overlay on top of real-money gaming, both in the casino and online. We believe there’s a little bit of fantasy involved—they can bet thousands of “virtual” dollars—as well as a desire not to overspend on playing the games.

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