Global Gaming Business, March 2016 by Global Gaming Business

p. 1 cover march:_cover, inside, back.qx 2/16/16 11:03 AM Page 1

GGB Global Gaming Business Magazine

BINGO SYSTEMS iGAMING LESSONS NETENT’S U.S. LAUNCH IS REIT RIGHT FOR GAMING?

March 2016 • Vol. 15 • No. 3 • $10

Reel Value Why the Aristocrat-VGT combo could be the most successful consolidation

Tracking Treatment

Family Feud How disenrollment is dividing Indian Country

Are loyalty programs being managed to recognize your

best players? Official Publication of the American Gaming Association

Association of Gaming Equipment Manufacturers

p. 4 toc march:_table & mast.qx 2/16/16 10:44 PM Page 4

CONTENTS

Vol. 15 • No. 3

march

Global Gaming Business Magazine

34 COVER STORY

COLUMNS

Strong Union

18 AGA

The incorporation of Class II expert VGT by Aristocrat Leisure Industries has made the combined whole stronger than its parts. Aristocrat is benefiting from VGT’s Class II business and its expertise in stepper technology, while VGT is benefiting from Aristocrat wide-area technology and international markets. By Frank Legato

New National Pastime Geoff Freeman

20 Fantini’s Finance Back On Top Frank Fantini

40 Table Games March Madness Brooks Pierce, managing director for the Americas, Aristocrat; Jay Sevigny, president, VGT

FEATURES

22 21st Century Tracking Customer loyalty is crucial in the gaming industry, but the traditional player tracking systems have not kept pace with technology. Learn why the personal touch is just as important as the latest system. By Frank Legato

30 The REIT Route Lower taxes and freedom to grow with fewer regulations are among the benefits casinos cite as they turn to real-estate investment trusts for new ownership structure.

Business of Bingo One of the oldest games in the casino business is still going strong, thanks to new technology and dedication to tradition. By Dave Bontempo

72 New ICE The 2016 edition of the ICE Totally Gaming trade show set new records. Here’s a snapshot of Europe’s largest trade event. By Roger Gros

Global Gaming Business MARCH 2016

10 5 Questions 12 Gaming Education 14 AGEM Page 58 Emerging Leaders With MotorCity’s John Policicchio, IGT’s Jacob Lanning, and Lucky Dragon’s David Jacoby

60 New Game Review 68 Frankly Speaking 70 Cutting Edge 74 Goods & Services

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

50 U.S. vs. Europe The roadmap for implementation of legal online gaming was already completed by Europe, but the law makes the model difficult in the U.S. By Steve Ruddock

8 By the Numbers

81 People

44 Out of the Tribe?

By Dave Palermo

DEPARTMENTS 6 The Agenda

By Marjorie Preston

An increasing number of tribes are initiating disenrollment procedures to reduce tribal membership rolls, according to critics for nothing more than increased per-capita payments.

Roger Snow

With Madis Jääger, Chairman and CEO, Olympic Entertainment Group

iGNA Outlook 54 Sausage Ingredients Sue Schneider

56 iGames News Roundup

ITâ&#x20AC;&#x2122;S COMING.

aristocrat-us.com

#aristocratslots

p. 6 agenda:_table & mast.qx 2/16/16 11:05 AM Page 6

THE AGENDA

A Sporting Chance Roger Gros, Publisher

ast month, I went to my first football game in London. Yeah, that game that we call “soccer” in the U.S. No, I didn’t see Chelsea or West Ham. Arsenal or Tottenham. We went to an older, smaller stadium on banks the Thames, home of the Fulham Football Club, which does not currently play in the Premier League. The quaint Craven Cottage stadium is nestled next to the former palace of the bishop of London, alongside a quiet neighborhood of row homes. The crowd was boisterous and enthusiastic, with the color and chanting that makes English football so endearing. But what fascinated me was a betting window underneath the grandstands where punters could make any number of wagers on the game that was about to be unveiled on the pitch. Of course, this kind of wagering is engrained in sporting events around the world, but is a complete anathema to American sports. Sports betting has always been the “third rail” of illegal wagering. Americans can accept the lottery, casino gambling, even online gambling, but it was thought that they would reject any wagering on their sacrosanct sporting events. All the major sports leagues and collegiate athletic organizations in North America were united against sports betting. Until now. The American Gaming Association in January issued a report on the amount of money that would be wagered on the NFL’s Super Bowl. The AGA estimated that bets in the U.S. on Super Bowl 50 between the Denver Broncos and Carolina Panthers would amount to a record $4.2 billion. Of that, $4.1 billion would be wagered illegally. So, Americans clearly have no reservations about betting illegally on sporting events, sending most of the benefits of those wagers, however, to organized crime and related underground groups. So what has to be done to change this dynamic? Geoff Freeman, the president and CEO of the AGA, says it’s time to start thinking about it. “The casino gaming industry is leading the conversation around a new approach to sports betting that enhances consumer protections, strengthens the integrity of games and recognizes fans’ desire for greater engagement with sports,” he says.

Global Gaming Business MARCH 2016

But the AGA is not alone in this. The commissioner of the National Basketball Association, Adam Silver, last year penned an op-ed piece in the New York Times advocating for legalization, regulation and taxation of sports betting. Silver knows that sports betting enhances the excitement level for sports fans. Other leaders of major sports organizations have since suggested maybe it’s time for a re-evaluation. But the sports leagues have quietly gone beyond that. The NFL, probably the most strident voice against sports betting, recently became a part owner of newly formed Sportradar US, the subsidiary of a Swiss company that provides real-time statistics, scores and odds to bookmakers, including offshore sports books that offer illegal betting in the U.S. The NBA and Major League Baseball own pieces of fantasy sports companies, which have recently come under scrutiny across the nation as illegal gambling. MLB is protecting itself against game-fixing by reaching an agreement with London-based Sport Integrity Monitor, to monitor betting lines and identify suspicious betting activity that might indicate fixed games. Last month, Las Vegas Sands Chairman Sheldon Adelson put the considerable weight of his organization behind a possible stadium for UNLV in Las Vegas that could also host an NFL franchise. Adelson met a few days later with the owner of the Oakland Raiders, who is looking for a new home for his team. And the NFL said it would have no problem if a team wanted to move to the gambling capital. So clearly, the time has come to take a closer look at sports betting in the U.S. and determine how to legalize it, regulate it and tax it to ensure the consumers are protected, the integrity of the games remains intact and illegal gambling is quashed. Gambling isn’t necessary to enjoy sports. I still rooted for Fulham that afternoon in London even though I didn’t get a bet down. But it certainly adds to the experience for some people, and residents of North America should get that opportunity.

Vol. 15 • No. 3 • March 2016 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com JohnBuyachek, Director, Sales & Marketing jbchek@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com Becky Kingman-Gros, Chief Operating Officer bkingros@ggbmagazine.com Lisa Johnson, Communications Advisor lisa@lisajohnsoncommunications.com Columnists Frank Fantini | Geoff Freeman Sue Schneider | Roger Snow Contributing Editors Stephanie Adkison | Dave Bontempo | Joe Dimino Emily A. Mattison | Dave Palermo Marjorie Preston | Steve Ruddock

EDITORIAL ADVISORY BOARD Rino Armeni, President, Armeni Enterprises

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

• Julie Brinkerhoff-Jacobs, President, Lifescapes International

• Nicholas Casiello Jr., Shareholder, Fox Rothschild

• Jeffrey Compton, Publisher, CDC E-Reports

• Geoff Freeman, President & CEO, American Gaming Association

• Dean Macomber, President, Macomber International, Inc.

• Stephen Martino, Partner, Duane Morris, Baltimore

• Jim Rafferty, President, Rafferty & Associates

• Thomas Reilly, Vice President Systems Sales, Scientific Games

• Steven M. Rittvo, Chairman/CEO, The Innovation Group

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

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

• Roy Student, President, Applied Management Strategies

• David D. Waddell, Partner Regulatory Management Counselors PC Casino Connection International LLC. 901 American Pacific Drive, Suite 180 • Henderson, Nevada 89014 702-248-1565 • 702-248-1567 (fax) www.ggbmagazine.com The views and opinions expressed by the writers and columnists of GLOBAL GAMING BUSINESS are not necessarily the views of the publisher or editor. Copyright 2016 Global Gaming Business LLC. Henderson, Nevada 89014 GLOBAL GAMING BUSINESS is published monthly by Casino Connection International, LLC. Printed in Nevada, USA. Postmaster: Send Change of Address forms to: 901 American Pacific Dr, Suite 180, Henderson, NV 89014

Official Publication

Mega Money. Mega Often.

30 Years and $1.2 Billion in Jackpots… and Counting

After three decades, we’re upping the ante with larger prize pools and increased jackpot frequency. ** Introducing the next generation of Megabucks® Jackpots with the power to out-perform even your highest expectations. Megafy your floor today by calling your IGT Account Manager. **Varies by market. Check with your IGT Account Manager for more info.

©2016 IGT. Except where ownership is otherwise identified, the trademarks used herein are owned by IGT or its affiliates, may not be used without permission, and where indicated with a ®, are registered in the U.S. Patent and Trademark Office. IGT is committed to socially responsible gaming. Our business solutions empower customers to choose parameters and practices that become the foundation of their Responsible Gaming programs.

p. 8 numbers mar:Layout 1 2/16/16 9:58 AM Page 8

BY THE

NUMBERS

SLOT SENSE The types of slot machines differ in every country in the world because of different regulations and player preferences. In the latest Eilers-Fantini Slot Survey (for the fourth quarter of 2015), charts showed the breakdown of the different kinds of slots, as well as the market share in North America and internationally. Below, two charts break down the different styles of machines in the U.S. and international markets.

SLOT PRODUCT AROUND THE WORLD

Market share is determined by the number of active slot machines in casinos around the world. IGT continues to have the largest market share in both the casino-owned and the leased/participation games in North America and internationally.

NORTH AMERICAN MARKET SHARE

SPORTS SENSE The American Gaming Association released a survey right before last monthâ&#x20AC;&#x2122;s NFL Super Bowl. As part of its initiative to influence changes in U.S. sports betting laws, the AGA commissioned the study, which produced some interesting findings, including the fact that 65 percent of the people who said they were going to watch the Super Bowl agreed that the integrity of the games would be improved with legal sports betting. Other findings: Currently, federal law makes sports betting illegal almost everywhere in the country, except in Nevada. Do you favor or oppose changing federal law so that each individual state can decide whether or not to allow sports betting in their own state?

Favor: 66% Oppose: 25% How does betting influence your enjoyment of the game? When I bet on a game, I follow the teams and players more closely.

INTERNATIONAL MARKET SHARE

Agree: 55% Disagree: 32% When I bet on a game, I am more likely to watch that game.

Agree: 67% Disagree: 21% When I bet on a game, watching that game is more fun and enjoyable.

Agree: 53% Disagree: 32% Charts courtesy of the Eilers-Fantini Quarterly Slot Survey. To obtain a copy of the full report, contact Ashley Hara of Fantini Research toll-free at 866-683-4357 or at ahaha@fantiniresearch.com, or Todd Eilers at tellers@eilersresearch.com or 714-769-9154.

Global Gaming Business MARCH 2016

Is your advertising measuring up? Because we’ll take

agencies from anywhere. We view the crowded casino

the Pepsi challenge with other agencies. We will.

gaming category as an opportunity to demonstrate

Big agencies, little agencies, agencies with really long

how creativity can separate the winners from the

acronyms for names, agencies that claim to specialize

losers. So if you’ve thought about your advertising and

in gaming, agencies that claim they can help you

wondered if it’s measuring up, we’re your next agency.

more because they don’t specialize in gaming, agencies from up North, agencies from out West,

251.476.1283

RSG_40623-02_BrandingCampaign_PrintAd_GGB_February2016.indd 1

THE AD AGENCY FOR SMART CASINO BRANDS.

REDSQUAREGAMING.COM

1/7/16 8:31 AM

p. 10 5questionsmar:Layout 1 2/16/16 9:59 AM Page 10

NUTSHELL

5Questions n

etEnt has recently entered the U.S. market with its B2B iGaming products and services. Bjorn Krantz heads up the company’s U.S. operations, and explains why the experience and quality of the iGaming pioneer will give it a leg up as the U.S. market expands. The company is currently active in New Jersey and Bjorn Krantz plans to expand as other states approve legal iGaming. NetEnt operates only in regulated legal iGaming markets around the world. He spoke with GGB Publisher Roger Gros at the ICE trade show in London last month.

1 2

What is the NetEnt strategy in entering the U.S. market? We plan to offer our content on slot games for desktop and mobile to start our roadmap in the U.S. Later, we plan to offer our table games, as well. We pride ourselves as being creative and innovative in everything we do, and that will make a difference in the U.S. What are you going to bring to the U.S. that hasn’t been seen up to this time? One differentiation will be the look and feel of the games themselves. We’ve been around for 20 years and have been developing online casino games for the players. So, we know exactly what they want and need, and what they respond to, using the knowledge and experience that we have compiled during all that time. In New Jersey, this type of offering is unique, and we have been able to attract new players to the games. Another aspect is the depth of business intelligence we bring to the table. Over all these years, we have a lot of player history that can be used to help our clients optimize their operations. We can provide statistics that back up suggestions on how to improve the player experience and other things that will improve the overall site. Many European companies have been reluctant to come to the U.S. because the market is so small. Why did NetEnt make that decision? We came into New Jersey because we felt that New Jersey, with its larger population, was enough to make it interesting for NetEnt. We committed to the licensing process there in mid-2014.

3 4 5

You have some interesting branded games. You recently launched Guns n’ Roses and Jimi Hendrix games. How did that come about? We always look for the most iconic, mass-market brands. We believe brands complement our games, and put a lot of work into signing them up and then developing a game that is respectful of their brands. We’ll launch both of those games in the New Jersey market in March, and we’re very excited about it. You have a “live” casino product in Europe where live dealers take online wagers. Does that have an application in New Jersey and the U.S.? Absolutely. Over time, we’ll see different products being added, and this will be one of them. We’ll have to see how the compliance and oversight requirements work on it. Our product is strong in Europe, but in the U.S. we’ll need more critical mass, I believe, before trying something like that. 10

Global Gaming Business MARCH 2016

“They

Said It”

“To me, the priorities are obvious. It’s to expand and improve the convention center. And if we can find a fiscally responsible way to fund a stadium, MGM will be at the table as we always are, put money into it, support it, and I don’t give a hoot if it competes against us.” —MGM Resorts International CEO Jim Murren, to a Chamber of Commerce meeting on the subject of using room tax revenue to improve the Las Vegas Convention Center, a proposal opposed by rival Las Vegas Sands Corporation as competition to its own convention business (but which wants to use public money to build a new football stadium for UNLV)

“I don’t think there’s any question that every casino executive in the United States and beyond is thinking of a plan to get into Cuba. It was the playland for the United States in the 1940s and 1950s, and it could be again. It’s fabulous.” —Bob Jarvis, professor, Nova Southeastern University, on the potential to return Cuba to a gambling paradise

CALENDAR March 13-16: Indian Gaming 2016, Phoenix Convention Center, Phoenix, Arizona. Produced by the National Indian Gaming Association and Urban Expositions. For more information, visit IndianGaming.org. April 5-7: iGaming North America 2016, Planet Hollywood Resort & Casino, Las Vegas. Produced by the Innovation Group, BolaVerde Media, Lewis and Roca LLP and eGamingBrokerage.com. For more information, visit iGamingNorthAmerica.com. April 27-29: GiGSE 2015, Hyatt Regency, San Francisco, California. Produced by Clarion Gaming. For more information, visit gigse.com. May 3-5: Southern Gaming Summit/BingoWorld, Mississippi Coast Coliseum and Convention Center, Biloxi. Produced by BNP Media. For more information, visit SGSSummit.com. May 17-19: G2E Asia, The Venetian Macao. Produced by the American Gaming Association and Reed Exhibitions. For more information, visit G2EAsia.com. May 31-June 3: Juegos Miami, The Biltmore, Coral Gables, Miami, Florida. Produced by Urban Expositions and Clarion Events. For more information, visit JuegosMiami.com.

A proven performer with a high denom twist!

Transform the casino floor into the ultimate party with Carnival in Rio® HD, Everi’s new, high denomination version of one of its most popular gaming titles. The game’s colorful graphics and Free Spin Bonus will captivate players looking for a festive gaming experience like no other. Carnival in Rio HD is available on Everi’s Core HDX™ cabinet, featuring dual widescreen 23” monitors, integrated touchscreens, and a premium three-way sound system that makes players feel like they are part of the game. The game also features Everi Bet™, the unique bet configuration system that gives casino operators the power to optimize the casino floor for maximum returns. Add excitement to the casino with Carnival in Rio HD and let the celebration begin!

Powers the casino floor.™

everi.com

p. 12 educate:Layout 1 2/16/16 10:00 AM Page 12

GAMING EDUCATION

Back to the Boardwalk The recent woes of Atlantic City are only a blip in the long history of that town and its relationship with gambling. By Roger Gros

Global Gaming Business MARCH 2016

’’

he news couldn’t get much worse for Atlantic City. From four casinos closing in 2014 to a potential threat of gaming expansion in North Jersey to a possible city bankruptcy, the Boardwalk town has hit bottom… again. Atlantic City was founded in 1854 as an escape from the summer heat for the rich people of Philadelphia. A rail line linked the two cities and Atlantic City began to thrive for its pristine beaches, clean ocean air, and very quickly, its somewhat shady reputation where anything goes. David Schwartz is a native of Atlantic City, the son of a very prominent Atlantic City journalist, and today the director of the Center for Gaming Research at the University of Nevada, Las Vegas. The author of many books on gambling, he recently returned to his roots with the release of Boardwalk Playground: The Making, Unmaking and Remaking of Atlantic City. The book is largely a collection of essays Schwartz wrote for Casino Connection magazine, when it was a print publication in Atlantic City (published by the parent company of GGB). It recites history, culture and politics of the city since its founding through the casino era. Schwartz is true Atlantic City. A graduate of Atlantic City High School, one of his first jobs was dressing up as Mr. Peanut and shilling Boardwalk visitors to buy some. Later, he worked in several casinos in Atlantic City before becoming one of the most preeminent academics in gaming. He says Atlantic City has always been involved in gaming—legal and illegal. During the first half of the 20th century, it wasn’t hard to find action in the city. The legendary 500 Club where Dean Martin and Jerry Lewis met and developed their act and where Frank Sinatra played had a widely known casino in its back room. So it wasn’t such a surprise when Schwartz discovered a little-known fact about Atlantic City gambling. “Doing research for the book, I discovered that the first proposal to legalize gambling in Atlantic City came back in 1936,” he says. “So for a long time, legalizing gambling and making it a balanced approach was part of the Atlantic City mentality.” The advent of hard times caused the drive for legal gambling to heat up. The debacle that was the 1964 Democrat Convention held in Atlantic City was rock bottom. Solutions, including gambling, were considered starting in the late 1960s. “When gambling was illegal in Atlantic City,” says Schwartz, “you had groups that were in power that benefited from that, your Nucky Johnson types (the inspiration for Nucky Thompson in HBO’s Boardwalk Empire). There were always reformers, but they didn’t really get the upper hand until the 1950s, for a variety of reasons, most not even specific to Atlantic City. “But people didn’t realize that quickly. In the 1960s, there were groups that wanted a change, which included legalized gambling. Las Vegas was doing great and Atlantic City wanted to be like that. And incredibly in the

Atlantic City has reinvented itself time and time again. There’s nothing to suggest that won’t happen again. —David Schwartz

’’

mid ’70s, they were able to convince the rest of the people in New Jersey that Atlantic City needed help, and this was the best way to provide it.” But even then they couldn’t get it right. The first referendum, held in 1974, would have legalized gambling throughout New Jersey. Voters rejected that because most of them didn’t want a casino in their backyard. So two years later, advocates were back with a measure that legalized gambling only in Atlantic City. “It shows how impulsive it really was,” says Schwartz. “They didn’t really think about it until it lost in ’74. They didn’t think if it worked in Atlantic City that someone else would try it. In ’76 they had a better approach with more specifics and limited only to Atlantic City.” And now that politicians in North Jersey want to legalize casinos outside of Atlantic City, Schwartz has advice for them. “You’ve got to look at the unintended consequences of what you’re proposing,” he says. “You’ve got to look at it from all angles, because definitely the voters will. And second, try to be as specific as possible. The reason the referendum worked in ’76 is because the message was very clear: Help Atlantic City help itself. Sure, it was nice that the seniors would benefit with prescription drug discounts, but you allowed voters to give Atlantic City some leeway. That is why it was successful, and that is what would help this referendum pass too, or lose if they fail to do that.” Whatever happens with the vote, Schwartz is confident Atlantic City will survive. “Atlantic City has reinvented itself time and time again,” he says. “There’s nothing to suggest that won’t happen again.” Boardwalk Playground can be found at all the usual outlets, including Amazon, and the Mob Museum and Gamblers Book Store in Las Vegas.

GGB-TGG_GoldenWins_Ad_201603.indd 1

2/15/16 11:11 AM

p. 14 AGEM:Layout 1 2/16/16 10:01 AM Page 14

AGEMupdate AGEM KEY BOARD OF DIRECTORS ACTIONS

AGEM MEMBER PROFILE BetConstruct is an award-winning developer and provider of online and land-based betting and gaming solutions. BetConstruct’s innovative and proven offerings include an extensive range of market-leading vertical products including sports book, sports data solutions, RNG and live dealer casinos, poker, skill games, fantasy sports and more. BetConstruct technology and services are used by operators worldwide and are supported by 10 global offices. All partners benefit from the BetConstruct Spring Platform, which combines the vertical product suite, powerful back-office tools and allinclusive services that help contain operator costs. From white label to API and self-serviced solutions, BetConstruct empowers its operators to achieve more than they expected. In 2016, BetConstruct will launch another first for the gaming industry—the open-source gaming management system. BetConstruct will release the gaming management system (GMS) portion of its Spring Platform as well as all interface code needed to connect the GMS with other gaming products as an open-source product this year. As part of the open-source initiative, BetConstruct will launch a developer community to allow open discussion around the use of this product as well as the sharing of community-developed code. Additionally, BetConstruct will produce technical documentation and a fully commented code base, permitting skilled developers to extend the product’s capabilities. In the coming months, BetConstruct will be attending the Georgian Gaming Congress in Tbilisi, Georgia; the iGaming Asia Conference in Macau; the Indian Gaming Tradeshow & Convention in Phoenix, Arizona; GiGSE in San Francisco and iGNA in Las Vegas. Additional events will be announced during the year. For more information about BetConstruct, visit the website at BetConstruct.com, or call the London offices at +44 203 709 9010.

Global Gaming Business MARCH 2016

• Mexico’s Supreme Court of Justice recently approved the use of slot machines in casinos. This was welcomed by AGEM members and has resolved the uncertainty that has existed for some time. The ruling outlines that playing slots is not skill-based, but similar to taking part in sweepstakes, which is not defined as gambling in Mexican gaming law. This ruling is timely for the proposed conference that SEGOB is hosting in May in Mexico City that will focus on machine certification, legal machines and responsible gaming, among other topics. • The recent developments in Brazil that could allow as many as 35 casinos to be constructed, as well as online gaming approved, is unlikely to see much progress until after the Olympics, industry experts believe. • Argentina saw foreign currency restrictions being lifted at the beginning of the year, which should see the market start moving in a more positive direction. This will also allow the movement of goods in and out of the country to flow more freely and ease some of the issues AGEM members have previously experienced exhibiting at trade shows. • AGEM membership grew to 150 this month with Las Vegas-based Slot Constructor, a software games development company, joining the ranks as an Associate Member. • AGEM hosted a lunch on February 9 for Nevada state Senator Michael Roberson. This was a “Getting to Know You” event for AGEM members to meet the likely Republican candidate for Nevada Congressional District 3. Roberson was first elected to the Nevada legislature in 2010 and then again in 2014. During his time in the Senate, Republicans won the majority and his colleagues elected Roberson to be majority leader. • AGEM members approved a $5,000 sponsorship for the International Association of Gaming Advisors (IAGA) that will contribute toward the International Gaming Summit that is being held in Malta from May 31 to June 2.

AGEMindex

After ending 2015 on a positive note, the AGEM Index reported a decline in the first month of 2016, largely due to broader market declines that emerged. The composite index stood at 188.46 at the close of January 2016, which represents a decline of 8.86 points, or 4.5 percent, when compared to December 2015. However, compared to a year ago, the AGEM Index reported an increase of 6.57 points, or 3.6 percent, in the latest period. In January, 10 of the 14 global gaming equipment manufacturers reported month-to-month declines in stock price, with three down by more than 30 percent. Of the four manufacturers who reported gains in stock price during the month, only one was up by more than 5 percent.

AGEM Agilysys

Exchange: Symbol (Currency)

Stock Price At Month th End Jan-16 Dec-15 Jan-15

Peercent Change Prior Period iod Prior Year ar

Nasdaq: AGYS (US$) !

9.90 !

9.99 !

10.38 !

(0.90)

Ainsworth Game Technology

ASX: AGI (AU$) !

2.22 !

2.29 !

2.95 !

(3.06)

Aristocrat Technologies

ASX: ALL (AU$) !

10.25 !

10.21 !

7.02 !

0.39

Taiwan: 3064 (NT$) !

19.60 !

18.20 !

31.40 !

7.69

NYSE: CR (US$) !

47.76 !

47.84 !

60.95 !

(0.17)

Nasdaq: DAKT (US$) !

8.03 !

8.72 !

12.38 !

(7.91)

NYSE: EVRI (US$) !

2.81 !

4.39 !

6.61 !

(35.99)

OTCMKTS: GLXZ (US$) !

0.13 !

0.19 !

0.34 !

(31.58)

Nasdaq: GPIC (US$) !

9.20 !

8.96 !

8.29 !

2.68

NYSE: IGT (US$) !

14.47 !

16.18 !

16.92 !

(10.57)

Astro Corp. Crane Co. Daktronics, Inc. Everi Holdings Inc. Galaxy Gaming Inc. Gaming Partners International International Game Technology PLC INTRALOT S.A.

ATHEX: INLOT (") !

1.19 !

1.17 !

1.31 !

1.71

TYO: 9766 (¥) !

2,766.00 !

2,888.00 !

2,209.00 !

(4.22)

Scientific Games Corporation

Nasdaq: SGMS (US$) !

5.92 !

8.97 !

11.81 !

(34.00)

Transact Technologies

Nasdaq: TACT (US$) !

7.73 !

8.59 !

5.95 !

(10.01)

Konami Corp.

! ! " " ! ! ! ! " ! " ! ! !

(4.62)

(24.75)

46.01

(37.58)

(21.64)

(35.14)

(57.49)

(61.76)

10.98

(14.48)

(9.16)

25.22

(49.87)

29.92

! ! " ! ! ! ! ! " ! ! " ! "

Index Contribution !

(0.03)

(0.29)

(0.65)

0.03

(0.06) (0.35)

(0.83)

(0.02)

0.02

(3.77)

0.10

(0.80)

(2.15)

(0.07)

Change in Index x Value !

(8.86)

AGEM Index Vaalue: Decemberr 2015 !

197.32

AGEM GEM Index ex Value: Januaryy 2016

188.46

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

Hereâ&#x20AC;&#x2122;s to the Next Sixty Years.

The Diamond. The Symbol of Strength, Power,Leadership, Clarity, and of a 60th Anniversary. The past 60 years of JCM Globalâ&#x20AC;&#x2122;s history have been filled with pioneering products and solutions, significant milestones and business-changing inventions across all of the industries that JCM serves around the world. And as we celebrate 60 years of groundbreaking innovations, we have so much more in store for you.

The Next 60 Years Start Today.

READY IS ONE OF A KIND .

ARE YOU READY? We know that to get ahead in the gaming industry, you need to stand out. Your staff and your property need to shine to make sure your guests are happy. You need to be Ready. With fashionable, custom-designed apparel, fresh mats, restorative tile & carpet services, safety supplies, and more, Cintas will get you ready and keep your organization pristine. cintas.com/gaming 800.CINTAS1

DOCUMENT PATH:

Studio:Clients:Cintas:Mechanicals:CTSCTSGEN15015K011_Gaming_Print_Ad:_Released:021216:CTSGEN15015_Cintas_Gaming_Size_A_Spread_F:CTSGEN15015_ Cintas_Gaming_Size_A_Spread_F.indd

DATE/TIME: 2-12-2016 11:29 AM OPERATOR: Mike Hannon

AGENCY JOB NUMBER: CTS.CTSGEN.15015.K.011 ORGANIZATION: Ogilvy_and_Mather CLIENT: Cintas CREATIVE DIRECTOR: ART DIRECTOR: COPYWRITER: ACCOUNT EXECUTIVE: PRINT PRODUCER: PROJECT MANAGER: STUDIO COORDINATOR:

SLUG FONTS: DIN Regular FILE FONTS: Avenir Next LT Pro (Medium, Bold, Regular), Helvetica Neue (77 Bold Condensed) DUPLEX: No DIECUT: None PAGE: 1 of 1 SCALE: 1”:1” PRINTED AT: 79% RESOLUTION: HiRes

Sean.Robertson Sean.Robertson Damon.Lockett Anna.Johnson Joan.Shelton None Siya.Motamedi

BLEED: 17” x 11.125” TRIM: 16.75” x 10.875” LIVE: 16” x 10.125” INKS: Cyan Magenta Yellow Black LINKS: Cintas_TeaserBuildingIndustPrint_V0R1_150pct.tif (334 ppi; CMYK), Cintas_RFTW_Logo_Process_F.ai

Creative Director Art Director Copywriter Account Executive Print Production Project Manager Proofreader Studio Director Studio Manager Studio Coordinator

CLIENT: Ogilvy Description: Media Type: Operator: Round:

100 60

Cintas 4C Bleed Spread TJ iMac 1

Bleed: Trim: Live:

17” x 11.125” 16.75” x 10.875” 16” x 10.125”

100 100 60 100 100

Images: Cintas_TeaserBuildingIndustPrint_V0R1_150pct.tif (CMYK; 334 ppi; 89.6%), Cintas_RFTW_Logo_Process_F.ai (25.99%)

372 West Ontario, 6th Floor Chicago, IL 60654 312.644.4460

ISO 12647-7 Digital Control Strip 2009

100

DATE: 2-12-2016 4:41 PM

FILE NAME: I21587B_CTSGEN15015_Cintas_Gaming_Size_A_Spread_F.indd

70 70

30 30

100 60

100

100 100 60 100 100

70 70

30 30

100 60

100

100 100 60 100 100

100 40

40 100

40 70 40

70 40 40

40 70 40

70 40 40

70 70

30 30

100 40

40 100

10 40 40

20 70 70

70 70 40

70 40 40

0000

3.1 2.2 2.2 10.2 7.4 7.4 25 19 19

50 40 40

100

75 66 66 100 100 100 80 70 70 100

READY IS ONE OF A KIND .

DOCUMENT PATH:

Studio:Clients:Cintas:Mechanicals:CTSCTSGEN15015K011_Gaming_Print_Ad:_Released:021216:CTSGEN15015_Cintas_Gaming_Size_A_Spread_F:CTSGEN15015_ Cintas_Gaming_Size_A_Spread_F.indd

DATE/TIME: 2-12-2016 11:29 AM OPERATOR: Mike Hannon

Sean.Robertson Sean.Robertson Damon.Lockett Anna.Johnson Joan.Shelton None Siya.Motamedi

Creative Director Art Director Copywriter Account Executive Print Production Project Manager Proofreader Studio Director Studio Manager Studio Coordinator

CLIENT: Ogilvy Description: Media Type: Operator: Round:

100 60

Cintas 4C Bleed Spread TJ iMac 1

Bleed: Trim: Live:

17” x 11.125” 16.75” x 10.875” 16” x 10.125”

100 100 60 100 100

Images: Cintas_TeaserBuildingIndustPrint_V0R1_150pct.tif (CMYK; 334 ppi; 89.6%), Cintas_RFTW_Logo_Process_F.ai (25.99%)

372 West Ontario, 6th Floor Chicago, IL 60654 312.644.4460

ISO 12647-7 Digital Control Strip 2009

100

DATE: 2-12-2016 4:41 PM

FILE NAME: I21587B_CTSGEN15015_Cintas_Gaming_Size_A_Spread_F.indd

70 70

30 30

100 60

100

100 100 60 100 100

70 70

30 30

100 60

100

100 100 60 100 100

100 40

40 100

40 70 40

70 40 40

40 70 40

70 40 40

70 70

30 30

100 40

40 100

10 40 40

20 70 70

70 70 40

70 40 40

0000

3.1 2.2 2.2 10.2 7.4 7.4 25 19 19

50 40 40

100

75 66 66 100 100 100 80 70 70 100

p. 18 aga feb:Layout 1 2/16/16 10:01 AM Page 18

AMERICAN GAMING ASSOCIATION

Sports Betting Is New National

Pastime

Super Bowl bets prove that Americans— and their leaders—love to bet By Geoff Freeman, President & CEO, American Gaming Association

oments after Super Bowl 50, an interview on The Late Show with Stephen Colbert crystallized the current status of sports betting in America. Colbert’s guest was President Barack Obama, who acknowledged that he bets on the Big Game. “Of course I did,” the president said. “After every Super Bowl, I call the winning team to congratulate them. And sometimes I call the losing team, especially if I bet on them.” Super Bowl 50 was a milestone event for many reasons, not least of which was the amount bet on the big game at Nevada sports books and by Americans across the country. As betting on sports becomes more popular each year—a record $132.5 million was wagered legally in Nevada while more than $4 billion was bet illegally—sports fans overwhelmingly want the prohibition to end. New research shows 80 percent of Super Bowl viewers believe it’s time to change sports betting law, which limits this activity to four states: Nevada, Delaware, Oregon and Montana. Further, two in three viewers say states should decide whether or not to legalize sports betting. About 70 percent say regulating this pastime would make it safer for consumers and generate tax funds for much-needed local programs like education and public safety. And the vast majority of football fans—65 percent— say legal, regulated betting will protect the integrity of the games or have no impact on outcomes. In recognition of these views, and after the AGA board directed us to examine this issue, AGA is leading the conversation around a new approach to sports betting that enhances con-

Global Gaming Business MARCH 2016

sumer protections, strengthens the integrity of games and recognizes fans’ desire for greater engagement with sports. One piece of our campaign is conducting authoritative research that helps drive the conversation. Through public opinion survey data, for example, we highlighted the views of millions of Americans who are already betting on sports but would like to do so in a legal manner. Another piece is aggressive communications. We’re capitalizing on opportunities to convey the message that the status quo is unsustainable. AGA traveled to San Francisco ahead of the Super Bowl and connected with sports radio and TV stations from across the country, highlighting the opinions of sports fans and shining a spotlight on sports betting’s growing popularity. These interviews dovetail with a third part of our effort, which is building a grassroots network of support. On radio, TV and social media, we’re encouraging sports fans to sign up, get engaged and voice their desire for a change in sports betting law. Our new website, SportsBettingInAmerica.com, serves as a hub for capturing the momentum and quickly sharing the most up-to-date information on this dynamic, evolving issue. As record levels of Super Bowl betting— and the president’s participation—show, America’s passion for football is rivaled only by its enthusiasm for sports betting. You can expect a lot more from AGA in the weeks, months and years ahead to support the industry’s desire for a fresh approach to sports betting. Follow Geoff Freeman on Twitter: @GeoffFreemanAGA

Project1:Layout 1 2/15/16 1:30 PM Page 1

p. 20 fanitini:Layout 1 2/16/16 10:01 AM Page 20

FANTINI’S FINANCE

Back On Top Numbers don’t lie and gaming could be back

hile we are well into 2016, it is still instructive to look back on 2015. It was the year when the long and often uneven recovery of the American casino industry was finally achieved without question, and with strong December comparisons adding an exclamation point. The evidence appears in Fantini’s National Revenue Report, a monthly compilation of gaming revenues in every jurisdiction that reports them, including several Indian gaming enterprises. Revenues reached a record $40.6 billion, up 2.2 percent over 2014. That in itself was encouraging, but also encouraging was that absorption of the new capacity that had come into markets such as Ohio and Louisiana in recent years. Indeed, factor out new casinos and same-store revenues grew nearly a full percentage point to $30.8 billion. Further, the improvement accelerated throughout the year, ending in a December when revenues rose 2.3 percent to $3.4 billion, and 2.8 percent same-store to $2.7 billion. That absorption was evident throughout the country. Ohio is a good example. The state, which added several racinos in 2014, grew revenues 12.8 percent and kept same-store losses to 4 percent. But by December, all casinos had been open for more than a year and revenues grew a healthy 6.6 percent to $144 million. Perhaps the best example of gaming’s recovery is in the much-discussed northeastern corner of the country where talk of cannibalization and handwringing about over-capacity have been near obsessions since the first Pennsylvania casino opened a decade ago. In this super region of overlapping markets, we count all the casinos of Massachusetts, Connecticut, New Jersey, Delaware, Maryland, those in eastern Pennsylvania to include Hollywood near Harrisburg, those in southeastern New York west to include Monticello, and Hollywood in Charles Town, West Virginia. This region produced $10.2 billion in gaming revenue last year, 1.7 percent growth over 2014. 20

Global Gaming Business MARCH 2016

By Frank Fantini

Note, this does not yet include Connecticut table game revenue, as only slot revenue is released monthly. Results were not uniform. Atlantic City, Connecticut slots and Delaware continued to lose business to ever-greater competition. But Maryland, New York, eastern Pennsylvania and Rhode Island continued to grow and carry the region higher. Yet another example of gaming growth was in areas where there was no nearby new competition. Here are the revenue change comparisons in such states or markets compared to 2014: Arkansas Colorado Detroit Florida Illinois Kansas Mississippi Missouri South Dakota

+26.5 percent + 5.9 + 3.3 + 5.0 - 1.7 + 4.0 + 1.5 + 2.5 + 0.3

In those areas, only Illinois declined. Some portion of 2015’s improvement was weather-related, as the winter months were far milder than in the previous year. But industry growth was consistent throughout the year with revenues rising in every month but March and August. So, what will 2016 bring? The big drop in gasoline prices is over. It would not be surprising if prices rise this year and begin to take some fun money out of consumers’ pockets. The economy is always a factor, though politicians are accommodative in election years. They don’t want to do anything to upset the apple cart. There will be few new casino openings for markets to absorb, though MGM Resorts’ $1.3 billion National Harbor casino outside Washington, D.C., will not be welcomed by its Maryland and Delaware neighbors and might even have some effect on Atlantic City when it opens mid-year. If early January revenue reports are harbingers, 2016 will be another year of steady, if not spectacular, growth. In Pennsylvania, for example, January slot revenues rose 2.1 percent to $184 million even against last year’s ultra-mild weather and with a blizzard this year.

In addition, executives on fourth-quarter earnings investor calls have reported the positive trends continuing in the first quarter. Combine that with the sustained surge in Las Vegas business volumes and conditions are looking good for casino operators. Of course, it is still possible to see the glass as half empty. Hotel rates and gaming spend per customer are still largely below the records set in 2007. But slow and steady progress is probably more sustainable, and with more operator cost and debt discipline than in that halcyon era, profit margins can grow higher, and profitability, after all, is the name of the game.

STEADY GROWTH AHEAD If there is a casino operator that optimizes prudence and the effectiveness of perfecting its blocking and tackling, it is Boyd Gaming. Within the past year, CEO Keith Smith has talked about adding more non-gaming amenities, and recently has reported that early additions to entertainment and dining offerings have been paying off. Thus it was with some interest that we read the announcement that Boyd will add five dining concepts in a $30 million investment at its Orleans casino in Las Vegas as part of a $100 million systemwide upgrade of non-gaming amenities. Boyd’s announcement comes as Caesars has completed dining, entertainment and shopping additions along the Strip and MGM Resorts has added similarly along the south Strip where it too will soon open a 20,000-seat arena. These investments are not the multibillion-dollar bets the industry was making before the Great Recession. They are the targeted investments that should pay off in sustaining the recovery cited above. Casinos are in the experiential entertainment business, and these investments show that their operators know it. If they remain prudent and keep to this strategy, they will be profitably investable for years to come. After all, having fun never goes out of style. 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.

p. 22 playertracking:Layout 1 2/16/16 10:06 AM Page 22

Tracking

EvoluTion

BY FRANK LEGATO

How player tracking has evolved over three decades—and where it still needs to go

f player tracking, points and loyalty rewards are a relatively recent phenomenon in the 85-year history of the legal casino industry, evolution of the tracking function beyond the machines themselves with mobile technology, advanced geolocation and other enhancements is an even more recent development—and arguably the most critical one. Just ask the man who invented player tracking. In the early 1980s, John Acres introduced the first automated player tracking system through his company Electronic Data Technologies. “Steve Wynn wanted to put arcade-style ticket dispensers on his dollar slots at the Golden Nugget and I got involved in designing the electronics,” recalls Acres. “One ticket was spit out for every $50 of wagers and, just like kids in arcades do today, slot players took great pride in accumulating long strings of tickets that could be redeemed for room and food discounts.” Although players loved the system, the need for ticket refills and mechanical maintenance prevented widespread deployment and Acres went to work on inventing an all-electronic version. “Around this time, hotels were replacing room keys with electronic cards,” he says. “I thought it was a pretty cool idea. Then in 1982, my kids were going to get a Texas Instruments ‘Speak & Spell’ for Christmas. It had this amazing, low-cost display, so I swiped their toy from under the tree and tore it apart. The kids never knew, and by New Year’s Day, we’d combined that display with a hotel room key card to make the first automated player tracking system.” Acres eventually sold his company and the system to IGT, using the proceeds to found Mikohn Gaming, which later became Progressive Gaming International. Acres explains, “When I started Mikohn, it was all about electronic bonuses, especially progressive jackpots. We hit a home run business-wise but we couldn’t take the customer experience as far as I wanted. Progressive jackpots just don’t do much to create loyalty.” So Acres sold his second company and started yet another, which became

Global Gaming Business MARCH 2016

Acres Gaming. “Back then, progressives and other rewards were paid manually and players don’t like to wait. So we invented an automated bonusing system that could give rewards of cash or ‘free play’—which we called Xtra Credit—right at the gaming machine. Players loved the convenience, and we called the system Acres Advantage.” Eventually, IGT bought that company too, and that product is today the IGT Advantage system. Other system vendors like Bally (now Scientific Games), Konami, Aristocrat and IGT picked up the bonusing concept and ran with it in a number of different directions during the early 2000s, from comp coupons printed at machines to instant credit awards to elaborate enterprise-wide bonus events. Acres says the next opportunity is to personalize the player experience and extend it past the gaming machine. “iPhones and Facebook have dramatically increased player expectations as to personalization, immediacy and accessibility,” he says. “It’s no longer enough to divide customers by spending level into a few tiers and send them monthly offers by mail. We’ve got to reach players on their phones, without asking them to download specialized apps. And we’ve got to provide more immediate, deeply personalized service.” To accomplish that vision, Acres started a fourth company, which is appropriately named Acres 4.0. “The problem that we face today is that we’re still running our player tracking as if there is a large number of people just waiting to come into the casino and play, and that’s not true anymore,” Acres says. “And so, we have to turn that player tracking information into a change that we can make on the casino floor to create a more compelling player experience. “And that’s what we’re striving to do now—to find ways to use that same data. The gaming industry collects so much data, such a reliable set of data, in comparison to almost any other industry, yet we fail to use that data in a profitable way. A lot of times it’s just discarded, or ignored, or kept secret for concerns about security that are maybe overblown.”

p. 22 playertracking:Layout 1 2/16/16 10:06 AM Page 23

Development of player tracking system capabilities has ramped up, with innovation on both ends of the tracking cycle—development of a player profile with data on preferences, play habits, purchasing and other usable information at the front end; and new technologies helping to effectively use that data when the player visits a casino.

“

We can do a lot of anticipatory things to make the customer feel more valued, more special, to have a better experience. That’s our real opportunity.

”

—John Acres President and CEO, Acres 4.0

Acres 4.0 has utilized mobile technology to create new avenues for use of all that data in its flagship Kai product, a management and communications tool that automatically mines all customer data and translates it into actions that can be taken immediately, in response to any variety of factors—from a good player placing a card into the machine alerting a host for a personalized greeting to everything needed to please a given player. It’s all drawn from the player’s historical data—play preferences, win/loss, favorite restaurants, favorite activities and a wealth of other factors—and channeled immediately to casino employees’ mobile devices for action. “We can certainly understand when a player that matters to us first arrives, because we see their card inserted,” Acres says. “We’ll let you use that as cue, to

send a host over to say, ‘Hi Frank, good to see you—haven’t seen you in two weeks.’ Then we can go to the database and present this information to a host on a mobile device, so they don’t have to have a perfect memory, but they can appear to—‘Hi, Frank, I’ve got your Jack and Coke right here.’ We can do a lot of anticipatory things to make the customer feel more valued, more special, to have a better experience. That’s our real opportunity.”

End to End Acres 4.0 joins the major system suppliers in seeking ways to use data to improve the experience of players. They’ve been on a mission for several years, actually. Through the 1990s, as Acres notes, there was a stagnation as far as innovation to broaden the scope of player profiles. “For about 10 years, we had this tremendous expansion of the business—we simply made more of what we had,” he says. The Great Recession changed all that, and absent an inexhaustible supply of big gamblers, hardware in place to count the wagers would now need applications to better serve all customers. “When the recession came, it really showed us the problem,” Acres says. “We now look back and we can see that we did have a set of aging players, and that we were not creating new players— we were simply serving pent-up demand.” Development of player tracking system capabilities has ramped up since then, with innovation on both ends of the tracking cycle—development of a player profile with data on preferences, play habits, purchasing and other usable information at the front end; and new technologies helping to effectively use that data when the player visits a casino. On the front end, much of the progress has come from widening the scope of the database of information available to casino marketers and hosts. That has meant increasing the touch points at which information can be gathered. Scientific Games’ Bally Systems division, the leader in the casino systems space, has devoted much effort to broadening the capability of its solutions to gather and interpret data from a variety of touch points within an enterprise. “Bally systems now support retail ratings allowing for any POS outlet to configure point-earning values based on spend, creating a resort card solution,” MARCH 2016 www.ggbmagazine.com

p. 22 playertracking:Layout 1 2/16/16 10:06 AM Page 24

says Martha Langer, director of product management-systems for Scientific Games. “We also support many third-party interfaces for other revenues including sports betting, keno betting, simulcast and more that allow for a rating to pass into the systems and be configured to earn points. We are currently in the process of developing a big-data solution in the cloud to run through our Business Intelligence application. This can determine predictive analysis based on outside and inside information into your patron management systems.” Langer says this information is channeled into an unlimited “Multi-Point Bucket” that allows for the creation of loyalty programs awarding points, cash, coupons and more. “Allowing for configurable earning and redemption rates across the enterprise, earnings can include slots, tables, retail, achievement bonus awards, gift deposits, prize maintenance awards and more,” she says. “We have also enhanced our loyalty card evaluation setup to include multiple types of expirations to support local and tourist card programs.” Multiple touch points for data also has been a focus for Konami, and its fast-growing Synkros casino management system. “Casinos are definitely expanding the value of player analytics by merging data on gaming worth with non-gaming indicators to generate a complete customer worth profile,” says Michael Ratner, Konami’s director of product management-systems. “By tracking a customer’s spending behavior via loyalty program-enabled POS devices at all customer touch points—restaurants, spas, golf, retail, entertainment, etc.—that information can be combined with the customer’s gaming activity to provide powerful insights that span all areas of operation.” Synkros delivers the data to operators through a business intelligence tool called Konami Enterprise Intelligence (KEI). “KEI truly gives a 360-degree view of patron worth, enabling operators to make business decisions that impact their entire operation, from customer service to player reinvestment,” says Ratner. “Ultimately, operators can make better decisions when armed with a more complete picture of each patron’s total worth.” KEI includes a Patron Worth Evaluation tool that gathers highly configurable performance indicators to determine overall patron value across gaming and nongaming amenities. “Integrated with existing POS and hotel interfaces, this tool is able to compile a total worth score for each casino patron in the property’s database to better understand his or her full value, which is essential for effective and profitable marketing and service initiatives,” Ratner says. “Additionally, that data 24

Global Gaming Business MARCH 2016

“

KEI truly gives a 360-degree view of patron worth, enabling operators to make business decisions that impact their entire operation, from customer service to player reinvestment.

”

—Michael Ratner, Director of Product Management-Systems, Konami Gaming

can be leveraged through KEI’s report writer and centralized dashboard to generate ad-hoc reports, queries, summaries and analysis.” IGT’s Advantage System is developing along similar lines. Sina Miri, vice president of casino systems and system products for IGT, says the system integrates with both gaming and non-gaming touch points to capture relevant data for the marketing database. “IGT Advantage Custom Ratings stores non-gaming spend information that casinos can leverage to reward players with either points or complimentary offerings,” Miri says. “The IGT systems solution’s flexible application programming interface (API) allows virtually any outlet either on premise or off premise to send its spend data to the IGT loyalty system.”

Using the Data Gathering information is one piece of the puzzle, but effectively using that data to service casino patrons is the other discipline that has been rapidly developing over the past few years. All of the big system suppliers are working to make it easier to act on customer data. Scientific Games has been one of the companies leading the way in creating an online, mobile and cloud-based infrastructure for customer tracking. It’s a natural extension of what Bally Systems has done on the

p. 22 playertracking:Layout 1 2/16/16 10:07 AM Page 26

Bally Systems now offers Servizio, a tool to make it easy for marketers to reach, reward and communicate with customers while they are still in the house.

Privacy Please Data collected on players by casinos must be vigorously protected By Emily Mattison asinos entice patrons to sign up for their player tracking or rewards programs in efforts to accumulate a database of statistics and contact information. In exchange for their disclosure of personally identifying information, patrons are rewarded with the ability to earn credits while playing at their favorite casinos and receive offers, comps and services made available to members only. Although patrons can sign up for rewards programs online, they traditionally are required to physically appear at a casino for age and identification verification in order to obtain an actual player’s card. Frequently, casinos will collect the same type of data from patrons who wish to sign up for a rewards program. At the most basic level, all identifying information found on a driver’s license is recorded into a player tracking system, including name, address, date of birth and gender. Casinos will then attempt to record as many methods of contact as possible in order to ensure effective communication with the patron, including phone numbers and email addresses. During the initial sign-up process and upon verifying patron identification, self-exclusion lists or other casino-specific exclusion lists are checked. If an individual appears on such a list, an account will not (or should not) be established. Verification of identity is a critical step to creating an account; disciplinary actions stemming from marketing to self-excluded persons are common, and the accompanying penalties can be severe. A Social Security number is not required to obtain a player’s card. However, if through slot play, a patron wins a jackpot of $1,200 or more and a Form W-2G is required, a patron must provide his or her Social Security number, which will be retained in the patron’s player tracking account from that point forward. Further, if a patron requests credit from a casino, additional information on the patron and his or her bank account information will be requested and retained in the patron’s account (along with the patron having to undergo a credit check). Beyond the basic identifying and contact information, player-tracking databases may be augmented with information cultivated from a casino’s relationship with its patrons. For example, if spouses sign up for player’s cards at the same time, their marital status will be noted and the accounts will be linked to one another. Over time, details that a casino garners from a patron’s actions and preferences will be added to an account. If a patron visits a hotel that adjoins a casino and on each visit requests chocolate chip cookies in his room, that preference will be noted in his account. Alternatively, if multiple offers are sent to a patron for a game-day watch party and the patron never attends, a non-preference for sports may be noted. Favorite teams, foods, beverages, activities, people one normally travels with—all of these details will be added to a patron’s account. This information enables a casino to effectively and efficiently market to its patrons. Ultimately, it is imperative for a casino to ensure that its patron information is protected—not only from third parties, but also from competitors. It is rare to hear of casino patron information being compromised via a system

casino floor with its Elite Bonusing Suite, which allows operators to customize bonusing to players while they are at their machines, as well as creating a number of enterprise-wide bonus events like its popular Virtual Racing module. Bally Systems now offers Servizio, a tool to make it easy for marketers to reach, reward and communicate with customers while they are still in the house. “Our Servizio Mobile Service Solutions is a suite of intelligent, rule-driven applications that message your employees with key information,” Langer explains. “Servizio looks at what’s happening on your floor and tells your personnel what they should do about it—sending critical messages to your team members on their iPhone, iPod and iPad hand-held devices. “It completely automates and eliminates the traditional casino dispatch system and other outdated forms of communication, increasing efficiency and elevating customer service to unprecedented new levels.” Servizio’s suite of mobile apps covers any need that may arise: jackpot processing, player registration, host functions, proactive slot maintenance and more. “It’s a versatile, mobile, smart-system service product, integrated to your floor specifications, customized to your needs, and managed by the parameters you set,” Langer says. Konami’s Synkros also is constantly offering new applications allowing for more efficient bonusing and customer service. Using the Synkros “Advanced Incentives Bonusing Toolkit,” operators can deliver tournaments through the instant True-Time Tournaments module or interactive bonusing animations called BonuStream, which can be sent to targeted players in real time. “This helps ensure that patrons feel connected, valued, and in-the-moment,” says Ratner. “Casinos, in turn, are able to target specific player behaviors and reward and engage their players accordingly. These real-time bonusing functions are an important part of Synkros’ ability to reach players with an enhanced gaming experience.” The version of the concept included in the IGT Advantage system is called “Intelligent Bonusing.” “The shift from anonymous mystery bonusing to individual incentivebased bonusing marks a significant industry change in its approach towards en26

Global Gaming Business MARCH 2016

p. 22 playertracking:Layout 1 2/16/16 10:07 AM Page 27

breach. Regulatory jurisdictions in which casinos operate impose strict standards regarding system security. As an example, Illinois has adopted some of the strictest standards in the industry. Each casino’s approved internal control system must provide, in part, procedures for limiting access to computer programs and equipment, controlling passwords and segregating access within systems, dictating the complexity and expiration of passwords, and archiving unalterable logs of user access and security incidents. Additionally, network security must include a strong segregation of gaming-related systems from network segments accessible from the internet, implementing and monitoring an intrusion detection system and anti-virus software, and strict firewall settings. The Illinois Gaming Board only recently allowed remote access to a casino’s systems, with highly detailed approved internal controls and only for limited employees and limited reasons. With strong computer security and limited employees who may access the systems, patron information can be protected from outside influences. Beyond protecting the security of a computer system, a casino must also be concerned about protecting player information from employees who may take it to a competing casino. Although it is impossible to guard against an unethical employee, casinos require employees to sign non-disclosure agreements and employment agreements that reference the confidentiality of certain information. A recent disciplinary matter revoked the occupational license of an executive host at a casino who obtained internal lists of player names, play totals and account numbers and emailed them to another casino’s marketing director with whom she was interviewing for a new job. The disciplinary matter is still being resolved. Although most executive hosts tend to accumulate their own “book” of clientele and known contact information, employees who knowingly take personally identifying information or play information that belongs to the casino are subject to disciplinary and employment action. Overall, patrons balance the benefits of belonging to a player rewards program against the potential dangers that their confidential information will be compromised. Ultimately, they are comforted by security measures taken by casinos and their employees to protect that information. Emily A. Mattison is an attorney with Greenberg Traurig, LLP. She focuses her practice on gaming regulatory compliance, licensure and corporate counseling. Mattison formerly served as general counsel for the Illinois Gaming Board. She may be reached at 312-4561011 or mattisone@gtlaw.com.

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

Fresh perspectives. Greenberg Traurig is proud that Martha Sabol, Founder and CoChair of our firm’s Global Gaming Practice, is President of the International Association of Gaming Advisors (IAGA) this year. We are thrilled to continue supporting IAGA and IAGA’s 2016 International Gaming Summit, which will be held in Malta. Martha A. Sabol IAGA President Martha brings extensive experience and unique insight to the gaming industry. She represents national and international casino owners, operators and suppliers in the areas of regulatory compliance, acquisitions, licensure, internal investigations and corporate counseling. Martha has been involved in IAGA for more than a decade and understands the vital role the organization plays in shaping the industry.

Global Gaming Practice Acquisitions | Financing | IP | Labor | Litigation | Operations | Real Estate | Regulatory Learn more at gtlaw.com/gaming GREENBERG TR AURIG, LLP | ATTORNEYS AT LAW | WWW.GTLAW.COM The hiring of a lawyer is an important decision and should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and our experience. Prior results do not guarantee a similar outcome. Greenberg Traurig is a service mark and trade name of Greenberg Traurig, LLP and Greenberg Traurig, P.A. ©2016 Greenberg Traurig, LLP. Attorneys at Law. All rights reserved. Contact: Martha A. Sabol in Chicago at 312.456.8400. °These numbers are subject to fluctuation. 26946

p. 22 playertracking:Layout 1 2/16/16 10:07 AM Page 28

“

The shift from anonymous mystery bonusing to individual incentive-based bonusing marks a significant industry change in its approach towards enterprise-wide bonusing.

”

—Sina Miri, Vice President of Casino Systems and System Products, IGT

terprise-wide bonusing,” says Miri. “Our customers have said the ability to target dwindling marketing dollars away from random chance to those players that have truly earned these bonuses has been highly effective. “The customers have said they get the best of both worlds—higher gaming satisfaction from their best players and demonstrable return on investment. Today, the most valuable players are provided with increased loyalty incentives. Players know if they continue to play, a personalized reward awaits them. In the past, no matter how much they played, the reward was pure random chance.” Not just enterprise-wide bonuses, he adds, but a bonus personalized to each player. “IGT Systems has evolved its solution to focus on complex near-real-time player segmentation,” Miri explains. “Instead of a player list that is dated as soon as it’s printed, the casino enjoys the ability to identify and reward valuable players in the moment. “IGT Systems has integrated its Intelligent Bonusing suite with this enhanced player segmentation engine to create a highly appealing player reward mechanism —variable free play. The more you play, the better your chance of winning a significant reward.” More and more of those rewards are coming to players while they’re still onproperty. “IGT’s solutions are built with extensibility through powerful APIs to enable casinos to market to players in real-time using the most valuable tool— the casino’s mobile app,” says Miri. “Rather than create yet another app for a player to navigate though, IGT believes leveraging the casino’s player app is the most efficient and effective way to reach the player. “IGT’s sophisticated player segmentation engine acts as the foundation that provides key player information to the casino. The casino creates personalized offers, using the IGT APIs, and delivers these offers in real time using the casino’s mobile app. The IGT APIs offer two-way communications to the central player loyalty system. This allows a player to accept an offer using the casino’s mobile app that updates the IGT loyalty system in real time.”

Future View The disciplines of building a complete customer profile and having the ability to act on that data in real time are very much still a work in progress for all system vendors. Technologies like geo-fencing, beacons and other innovations are set to refine the personalized marketing efforts even further. Social casinos are becoming another tool not only for generating returns to the casino, but for marketers using system technology to gather even more thorough data—information players provide when they register for a social casino, and more importantly, information on the kinds of games they like to play. “Cloud-based gaming, mobile applications, geolocation offers, big data and predictive analytics to continue to provide marketing system solutions to the casinos will all be important going forward,” says Scientific Games’ Langer, who notes that the ecosystems being created for operators by Bally Systems gather 28

Global Gaming Business MARCH 2016

and evaluate information from all sources, on property and online. Along with these innovations, uses of mobile technology in customer service and marketing continue to multiply. Iverson Gaming Systems, a Pennsylvaniabased company specializing in creating systems for cruise-ship casinos, has pioneered use of the mobile phone as the new player’s club card, and even the new ATM. “In a mobile world, it’s almost embarrassing that the state of the art of our industry is still a serial port,” comments Millard Reeves, president of Iverson Gaming Systems. “So that’s what got us thinking about how to leverage brand new technology to bring the casino up to speed with the rest of the world. “The physical player’s card itself had to be completely reimagined: As soon as a player removes their card from the card reader on a slot machine, it’s as if that player disappears into thin air, which makes it difficult—if not completely impossible—to continue a personalized relationship with them. With our mobile technology, you no longer need a card, because your phone is the card. Your phone is what identifies you at the gaming location—at the slot machine, at the card table, at the roulette wheel.” Iverson also offers a mobile app called VirtualATM that allows players to use their smartphones to route funds directly into a slot machine. “The customers use their own smartphones to add credits onto a slot machine in a cashless transaction, to get money out of their personal checking or savings account with a PIN debit transaction,” says Reeves, “just like going to an ATM, except the player doesn’t have to get out of their seat to walk to the ATM.” New technologies to enhance the player tracking function are sure to come from the big suppliers, but also from innovators like Acres, who says his company is ready to work with suppliers to add Kai and related technology to any casino management ecosystem. “We are absolutely working with manufacturers on consolidating this automation element that we call Kai into the bigger picture,” Acres says, “and there’s a lot of opportunity there.” In the end, player tracking in the 21st century is about separating the marketing ecosystem from the game accounting that was the basis of that first EDT tracking system. For Acres, the system function needs to emphasize the personal touch that has been lost through automated rewards. “At the start of player tracking in the early ’80s, we saw ourselves automate more and more, so that we could process the masses,” he says. “The slot machines went from coins without credit buttons, to coins with credit buttons, to bill acceptors, to TITO tickets, all in the name of automation, to improve what we called the ‘service’ of the game. But what we lost was an important part of the experience—the human interaction.” Acres points to properties like Barona in California as examples of what should be the future of player tracking. “They’re using automation to bring back human interaction, and they’ve had tremendous success,” he says. “We see that as the real opportunity—not to say, ‘Here’s a robot that’s going to serve you,’ or, ‘Your point total is automatically changed,’ but to provide a human interface that can show compassion and concern and caring and friendship and love, armed with the information about you personally, so they can handle you in a way that’s special.”

INNOVATIVE ONCE

AGAIN

A new cabinet from a whole new perspective. First dual vertically integrated 42-inch full screen dynamic displays with a 42-inch fully tactile functionality. Incorporating 3D topper with digital technology for a stunning curb appeal for players. Fastest and most robust operating system, bringing players real time 3D technology. Innovative once again, taking the experience to new horizons.

Join us at

NIGA Booth

#1535

www.aruzegaming.com

p. 30 REIT:Layout 1 2/16/16 10:08 AM Page 30

Spin-Off City Lower taxes, lower borrowing costs, and more freedom to grow. Those are the some of the reasons companies form real estate investment trusts. But some analysts (and others) argue real estate investment trusts (REITs) are fundamentally unfit for the gaming industry. By Marjorie Preston

n November 2013, Penn National became the first gaming company to split itself in two. By spinning off its most of it property assets into a real estate investment trust, or REIT, the Pennsylvania-based gaming company created a new, wholly separate publicly traded entity called Gaming & Leisure Properties Inc. As part of the strategy, GLPI then took ownership of 21 of Penn’s 29 casinos and racinos, and leased them back to the original company through triplenet lease agreements. And the point of this whole chess game? For one thing, a considerable tax advantage, says Ron Kuykendall, of the National Association of Real Estate Investment Trusts, NAREIT. “The REIT is required by law to pass at least 90 percent of taxable income to shareholders through dividends, and for every dollar, it gets a deduction from its corporate tax,” says Kuykendall. “Practically speaking, the REIT can take a full tax deduction and pay no corporate taxes.” Second, in the marketplace, the promise of regular dividends may make REITs a more attractive investment proposition. Third, REITs have lower borrowing costs than gaming companies, so a spin-off adds borrowing power and frees management to concentrate on growth. Finally, as a separate entity in the role of “supplier,” a gaming-related REIT may be able to sidestep regulations limiting the number of casinos it can own in a given jurisdiction—a strategy first tested when GLPI acquired the property assets of 14 Pinnacle Entertainment casinos in eight states. UNITE HERE, the casino workers’ union, fought the deal in Indiana, saying the law limits casino ownership to two properties in the jurisdiction. If the deal—which is still not final—proceeds as planned, GLPI would own three. 30

Global Gaming Business MARCH 2016

A Good Fit for Gaming? In 2012, after Penn National announced its REIT, shares gained 28 percent, the biggest surge in four years. The hype has fizzled since then. In January, Fitch Ratings reported GLPI shares had declined 30 percent from a 52-week high in mid-2015; in an accompanying note to investors, Fitch analyst Alex Bumahzny said REITs in general may be a poor fit for the gaming sector be-

“We are focused on leveraging our unique position as the only standalone gamingfocused REIT.” —GLPI Chairman Peter Carlino

GLPI recently bought the Meadows racino outside of Pittsburgh, which it will own and operate

p. 30 REIT:Layout 1 2/16/16 10:37 PM Page 31

Caesars Palace is just one of two dozen properties owned by Caesars Entertainment that would be part of a separate REIT

“REITs made it possible (for the average person) to have the benefits of real estate investment. Commercial real estate is a specific type of asset, different from stocks and bonds, and can be a good income investment because the space leases tend to be long and rent streams tend to be quite stable.”

future with a vehicle with a lower cost of capital that they cause of the potential for conflict becan use to grow.” tween the REIT and its operating Caesars Entertainment, meanwhile, is planning a company, as well as the industry’s REIT as part of its Chapter 11 bankruptcy reorganiza“cyclicality and substantial (cap-ex) tion. If that plan is approved, the REIT would own two needs.” dozen casinos, which Caesars would continue to manage. Moreover, Uncle Sam has gotten In the process, the operating company could shed about wise to the use of REITs as a potential half of its $18 billion debt. tax dodge. With the Protecting Americans from Tax Hikes Act, or PATH, REIT Rationale signed by President Barack Obama in Real estate investment trusts, created by an act of ConDecember 2015, the Internal Revenue gress in 1960, have been compared to mutual funds. Service sent a signal that it would “not They were designed “to give all investors the opportunity look kindly on companies spinning off to invest in large-scale portfolios of real estate,” says their real estate as a tax-free event if Kuykendall. there’s no other business reason for it,” “REITs made it possible (for the average person) to says Frank Fantini, of Fantini Gaming have the benefits of real estate investment. Commercial Research. “If it’s just financial engireal estate is a specific type of asset, different from stocks neering, profits made in the spin-off and bonds, and can be a good income investment becan be taxed.” cause the space leases tend to be long and rent streams None of this has stopped other tend to be quite stable,” typically in the retail sector. gaming companies from jumping on —Ron Kuykendall, National Association In the case of Simon Properties, for example, which the REIT bandwagon. MGM Resorts of Real Estate Investment Trusts owns some 400 malls across the country, “the tenants are International is forming MGM Nordstrom and Macy. Nordstrom may be 15 years in a Growth Properties, which will own the mall, so the flow of rents is very consistent and it flows straight through to real estate associated with 10 of the company’s resorts, including seven on investors as dividend.” Hospitality may be a more volatile category, Kuykthe Las Vegas Strip. Unlike Penn National, MGM will own 70 percent of endall says, “because the stays are much shorter. When you think about hoits REIT and retain ownership of two key assets, the Bellagio and MGM tels, the lease is one night. Tenants come and go, and the rates charged at Grand Las Vegas. The debt-reducing strategy earned some applause from hotels can vary on a nightly basis depending on demand and the time of Fitch, which maintains its positive outlook on the Lion. year. That produces more variability in the revenue stream.” David Katz, managing director of New York-based financial services A similar argument was put forth when UNITE HERE tried to block firm Telsey Advisory Group, agrees that MGP could be advantageous for the Pinnacle REIT. In a court filing, the national hospitality union pointed the Las Vegas gaming giant. “We have a positive view on it because MGM out “significant risks” associated with the proposed spin-off. “Gaming owns a lot of really big-box real estate in a very concentrated, singular REITs are a new business model,” the filing said, adding that from Decemmarket,” Katz says. “Trying to alleviate some of that bad risk is what ber 2013 to April 2015, as GLPI’s stock price declined 27 percent, the they’re ultimately trying to achieve, as well as providing themselves in the MARCH 2016 www.ggbmagazine.com

p. 30 REIT:Layout 1 2/16/16 10:09 AM Page 32

MGM Resorts will spin off all of its properties into MGM Growth Properties except for the Bellago (l.) and MGM Grand

There is no one-size-fits-all formula for gaming REITs, and no predictable outcomes.

NAREIT Lodging REIT index price grew 28 percent. Also, as the Pinnacle deal demonstrates, acquisitions in the gaming industry do not come easy or fast. “It can take a year to close a deal in the gaming business because of the regulatory approval process, whereas a REIT can decide to buy a hotel, go to the capital markets, do a road show, raise the money and close the next week or a month later,” says Katz. “That time poses a risk, and I think the capital markets in general are still digesting gaming as a viable REIT-suitable operation.” The long-term lease structure can also be problematic in a turbulent economy. “If the economy were to head south or the property itself were to underperform, those leases are still fixed, and it creates a lot of pressure. It doesn’t flex down with the performance of the property,” says Katz.

Pros and Cons On the face of it, consolidation of interests in the U.S. casino industry seems to defeat a stated purpose of gaming REITs: to acquire new properties. Excluding the $4 billion Pinnacle deal, which is expected to close in April, and its acquisition of the Meadows Racetrack and Casino in Pittsburgh, also expected to close this year, GLPI has added just one property to its portfolio in the past two years: the Casino Queen in East St. Louis. But more casinos could come up for sale, say, if Caesars sheds assets in a bankruptcy. And as the name Gaming and Leisure Properties suggests, the REIT could look beyond casinos. Moreover, if casinos are an uncertain commodity these days, real estate remains a “tangible asset,” says Fantini. “No REIT is restricted to buying just casinos; they can buy shopping centers, hotels, amusement parks.” In its court battle with Pinnacle, UNITE HERE pointed out that no gaming REIT has been tested by a recession. As the Motley Fool’s Travis Hoium pointed out in an April 2015 column, “One of the reasons Caesars Entertainment, Penn National and others survived the (2008) recession was because they had real estate to use as collateral to obtain debt.” In the next 32

Global Gaming Business MARCH 2016

recession, operating companies “would have to fund operations without the backing of real estate, and if revenue declines, they could see profits and debt funding dry up. Instead of having a safety blanket like real estate to fall back on, companies could go bankrupt when the gaming industry goes into a lull.” After GLPI’s fourth-quarter earnings report in early February, Standard & Poor’s gave the REIT a qualified thumbs-up, “reflecting our expectation that, despite high leverage, GLPI’s relatively stable and predictable cash flow base will support modest EBITDA growth and allow the company to modestly reduce leverage over the next two years, absent additional acquisitions.” Chairman and CEO Peter Carlino said the completion of two big acquisitions this year “will result in a larger company with increased tenant and geographic diversity, along with higher cash flows. We are focused on leveraging our unique position as the only stand-alone gaming-focused REIT—as we look to grow over the long term and provide a reliable, attractive dividend to our shareholders.” As the debate continues, Fantini points out that GLPI shareholders have made out on their investment so far. “Before Penn National announced its REIT, the stock was selling at about $34 a share. If you were a shareholder (when the REIT was formed), you had one share of the new company and one of the old at a combined value of $39. “Even though the price of GLPI has come down in recent months, the fact is the combined value of the two stocks is 15 percent higher than it was three years ago—that’s not a huge rate of return, but gaming stocks are down right now. They may be coming back up this year. And as a shareholder, for my original investment I now have two stocks combined that are worth more than the old stock alone.” He adds that there is no one-size-fits-all formula for gaming REITs, and no predictable outcomes. “These companies are looking at REITs very closely and very seriously,” says Fantini. “They’re not doing any seat-of-the-pants kind of decision. You can’t say REITs are good or bad except on a select basis.”

THE FUTURE OF CASHLESS HAS ARRIVED

http://sightlinepayments.com Patent protected by United States Patent Nos. 8,708,809, 8,777,725, 8,998,708, 9,196,123, 9,245,413, and 9,251,651. Discover® and the Discover Acceptance Mark are service marks used by the issuing bank under license from Discover Financial Services. The Play+ program is managed by Sightline Payments. *Disclosure: Jurisdictional restrictions may apply. All gaming transactions use Sightline’s proprietary closed-loop network, SPAN™, and are not conducted on the Discover network. Play+ may not be used to fund illegal Internet gaming.

p. 34 aristocrat:Layout 1 2/16/16 10:10 AM Page 34

ClassAct

Aristocrat-VGT combination merges two

success stories

BY FRANK LEGATO

ack in 2009, Jamie Odell, CEO of Australian slot manufacturer Aristocrat Leisure, Ltd., made a commitment to improve the legendary slot-maker’s North American business. Odell’s five-year plan to accomplish that goal was to focus on growing the company’s inventory of premium games. In the ensuing five years, Aristocrat brought in the best design talent in the industry, secured licenses to create blockbuster games from The Walking Dead to Britney

p. 34 aristocrat:Layout 1 2/16/16 10:10 AM Page 35

“

Unlike some of our competitors’ acquisitions where they were reliant upon synergies to make it pencil, ours wasn’t that way at all. It all tucked in very nicely, and now we’ve just grown the business together, and leveraged the best of Aristocrat and the best of VGT.

”

—Brooks Pierce, Managing Director for the Americas, Aristocrat

Spears, and created show-stopping presentations like the Arc Double and the Behemoth that draw crowds to the slot floor. But one move at the end of that critical five-year period arguably has done more to boost Aristocrat’s gaming operations portfolio than any other—the 2014 acquisition of Tennessee-based Video Gaming Technologies for $1.28 billion. The VGT acquisition stood out among the mega-mergers and buyouts of that year, because unlike the others, it did not represent a consolidation, but rather an expansion, giving the acquiring company something it never had—a foothold in the Class II Native American gaming machine market. More than a foothold, in fact. VGT was and is the largest supplier of Class II games in the U.S. Its 20,000-plus units in the field (mostly in the Class II heartland of Oklahoma) account for nearly 40 percent of the total Class II market. From just about any angle, everything about the VGT acquisition made sense. “First, we weren’t in the Class II space, so it was an accretive move for us to get into that market,” says Brooks Pierce, Aristocrat’s managing director for the Americas. “Secondly, VGT was a very well-run company in a strong business that we thought we could integrate nicely, which we have. And lastly, the attractive part about it was the gaming operations nature of the business.”

CLASS II PEDIGREE Aristocrat always had great relationships with tribal gaming operators in Class III compacted markets, and if the goal was to augment those relationships in the Class II space, it couldn’t have chosen a better partner than VGT. Founded in 1991, VGT was one of the first suppliers to realize the potential of the Class II tribal business which was created only three years earlier with passage of the Indian Gaming Regulatory Act. The company quickly established itself in the Oklahoma market. “VGT was one of the first companies to come into Oklahoma, and built a market share pretty quickly,” says Jay Sevigny, president of VGT. “Most importantly, VGT grew right along with a lot of the tribal gaming, and developed a lot of trust. We think of it as a shared partnership, and today, our relationships are very, very robust.” In many ways, VGT provided the final piece of the puzzle in Aristocrat’s resurgence, which saw adjusted ship share rise to 23 percent in the fourth quarter of 2015. The Class II business completes a package that already had seen gaming operations business soar, from the company’s traditional casino business to its newer social casino offerings, made possible by the 2012 acquisition of social content supplier Product Madness. Pierce says the majority of Aristocrat’s North American business is now gaming operations content.

But the addition of a burgeoning Class II business to Aristocrat is only one benefit of the union. After all, this wasn’t a strong company taking over a weak company. Each company had developed technology that propelled it to the top tier of its market. “Unlike some of our competitors’ acquisitions where they were reliant upon synergies to make it pencil, ours wasn’t that way at all,” says Pierce. “It all tucked in very nicely, and now we’ve just grown the business together, and leveraged the best of Aristocrat and the best of VGT.” The integration of technologies already has begun. Last summer, VGT unveiled Easy Money Jackpot, its first-ever wide-area progressive link, at 11 casinos across Oklahoma. It was made possible thanks to technology from Aristocrat—specifically, the legendary Hyperlink multiple-progressive platform that brought the Australian company one of its first huge successes in the Americas in the early 2000s. It was a combination of the best technology of the two companies. “VGT had struggled for quite some time and wasn’t able to deliver the wide-area progressive technology,” Pierce explains. “The problem was pretty much ready-made for us. We integrated with VGT, and within nine months, they had a WAP out in the marketplace. And it’s doing phenomenally well. It’s probably the best illustration of where we’ve leveraged our technology for the benefit of VGT.” “It’s up to about $775,000,” Sevigny says. “People are real excited about it; it’s working very well, and it’s a great benefit to us.” That was the jackpot at press time—resets are at $250,000. “It’s been a phenomenal additional platform for our customers’ business,” says Pierce. “It gives them a wider breadth of coverage in the Class II space. Obviously, with the volumes of play in Oklahoma, you can get some pretty big jackpots. So from a customer perspective, it has been greeted really warmly.” Aristocrat, meanwhile, is benefiting from a technology perfected by VGT over the years—the three-reel mechanical platform that houses all those Hyperlink-fueled wide-area progressive slots in Oklahoma. Despite the moniker Video Gaming Technologies, VGT has been at the forefront of innovation in the reel-spinning genre in the Class II space. The company’s patent-pending mechanical game terminal—traditional reels and stepper motors controlled by VGT’s proprietary Live-Call Bingo platform—has dominated a large portion of the Oklahoma Class II gaming market. Since the merger, Aristocrat and VGT have worked to develop a Class III stepper using VGT’s technology. At last fall’s Global Gaming Expo, Aristocrat showed the Global Stepper, its first developed with VGT. “It’s a beautiful product,” Sevigny says, “and we’ve been very involved in its development. We have a number of MARCH 2016 www.ggbmagazine.com

p. 34 aristocrat:Layout 1 2/16/16 10:10 AM Page 36

“

With Aristocrat we brought a wide-area progressive to tribal properties, which is fantastic for all of us. And every time we do these types of things, it strengthens the abilities of the tribes and the casinos to succeed and compete, and to continue to grow and achieve their objectives as well.

”

—Jay Sevigny, President, VGT

hardware and software engineers that have experience in that area, so we’re very pleased to be part of that project.” “The stepper has been an interesting part of our integration,” says Pierce. “We worked with VGT engineers on developing platform design and product management, along with our industrial design group. What we’re trying to do is take the best of what we know in Class III—and as you know, our cabinet strategy has been robust, with Helix, Double Arc and Behemoth—and combine the best of that industrial design with the core mechanics and functionality VGT knows so well in the stepper.” The Global Stepper was displayed in prototype at G2E. Pierce notes that while Aristocrat has offered stepper lines in the past, low-denomination video has always been its wheelhouse, and VGT has been churning out high-earning steppers for years. “We also think it’s a space that’s ripe for innovation,” he adds. “And frankly, our customers have been clamoring for us to get into this space, because it’s a big part of their market as well—20-25 percent of the U.S. market. We don’t play in it, but we will by the end of this year.” Sevigny adds that where VGT helps Aristocrat in stepper technology, Aristocrat helps VGT in video. “First and foremost, the two companies had very compatible cultures,” he says. “This was an acquisition by Aristocrat that was justified based on the complementary aspects of our businesses. They are very dominant in Class III, and VGT is very dominant in the mechanical stepper product. We have stepper technology and capabilities to assist them, and they’re doing a lot to assist us in the development of video products.” 36

Global Gaming Business MARCH 2016

GROWING TOGETHER While Pierce and Sevigny are obviously hesitant to reveal specifics, both say the sharing of technologies is likely to result in more products that bring the strengths of one to the market of another—or to new markets altogether. “VGT was beginning to launch a new platform at the time of the acquisition, and we have that in storage right now,” Sevigny says. “It’s actually a fabulous platform, but with all the development going on with the Aristocrat platform, we’re joining them for this next wave of games.” But will those games include Aristocrat hits for VGT? VGT titles in Class III casinos? For now, that’s being kept close to the vest, although Sevigny does concede that he would eventually like to do more Class II video products. But not right away. “We are very excited about putting some Class II games out on their platform, and we do anticipate that we’re going to be bringing some Class III titles in,” says Sevigny. Pierce says the beauty of the combined company is that both legacy platforms stand alone. “Nobody has better math in Class III than Aristocrat, but you could argue that nobody has better math than VGT in Class II. We feel we’ve got the best of both worlds.” And both worlds will now grow, adds Sevigny. “We are growing outside of Oklahoma now, and one of the opportunities of being with Aristocrat is that the technology capabilities are significant. With Aristocrat we brought a wide-area progressive to tribal properties, which is fantastic for all of us. And every time we do these types of things, it strengthens the abilities of the tribes and the casinos to succeed and compete, and to continue to grow and

James H. Dennedy President & Chief Executive Officer

To Our Tribal Gaming Colleagues and Friends, Agilysys has a long and successful relationship with Native American Casino Resorts. For over 15 years, we’ve enjoyed serving your needs through our industry-leading Property Management Systems, Point of Sale, and Inventory Management solutions; and our recently introduced payment, table management and bookings, and analytics solutions. The gaming segment of hospitality is a critical part of our business, and serving tribal gaming is key to our future. To be your trusted business partner, it is important for us that you know of our commitment to supporting your business, understanding the importance of your business to your communities and respecting the sovereignty of your nations. Through our participation and sponsorship of NIGA, TribalNet and OIGA we have supported your efforts to demonstrate the positive impacts of Indian gaming on tribal and nearby communities. Many nations have engaged and entrusted Agilysys with their hospitality solutions needs to help them successfully grow and manage their business. Expanding our tribal gaming business is an important executive initiative in our company, and we would like to meet with you to discuss how we may be the best solutions provider for your needs and express our commitment to gaming, tribal gaming and the support of your communities. Please contact Jen Brown, 770-810-6007 or Jen.Brown agilysys.com, to schedule time with our leadership team. You can count on Agilysys to stand beside you as a trusted business partner and friend. Very Respectfully,

James H. Dennedy President and Chief Executive Officer

Jim Walker Vice President – Sales

Darren Student Director - Gaming Sales

1000 Windward Concourse, Suite 250 • Alpharetta, GA 30005 • 877.369.6208 • www.agilysys.com

p. 34 aristocrat:Layout 1 2/16/16 10:10 AM Page 38

achieve their objectives as well.” Sevigny says VGT is even looking to expand to Aristocrat markets beyond the U.S., and there appears to be great customer interest in that possibility. “But the real opportunities for us, in the near term, are closer to home.” As in an expansion of VGT’s already-strong Class II presence in the U.S. beyond Oklahoma, which is home to 90 percent of the current VGT installed base. “We’d love to be in every Class II market,” says Sevigny. “We have a wonderful product and we create great value for the players, and in doing so, we create great value for our tribal partners. Every tribe has its own specific objectives, and some tribes have compacts where they’re allowed Class II and Class III, but we look forward to working with any tribe.” Adds Pierce, “It’s made sense for us to leverage the VGT infrastructure in Oklahoma, and we have, in terms of service, sales and support. In other markets where Aristocrat has more feet on the ground, VGT will come to us when they look to expand to those markets. They have a direct sales force, but we certainly have contacts and relationships with most of the customers they would call on. “We look at it holistically. From a customer standpoint, we’re trying to offer them the best of what we have, both in Class II and Class III.” He adds that customers love dealing with one company for both classes of game, particularly as tribes look to increase Class II inventories. “They love the fact that they can get from one company under the Aristocrat umbrella all the solutions they’re looking for,” Pierce say. “California’s a perfect example—most of the properties out there have a mix of Class II and Class III, so they love the idea of being able to deal with one organization. “When you get the combination of one interface with two channels that are doing extremely well, and a company that’s dedicated to innovation like we are, and add in for us the stepper product in Class III, it makes it easy for the customer to go do a lot of their onestop shopping.” Pierce says the integration of the two companies is complete. “It’s a normal occurrence to have meetings with VGT people on a regular basis, but the nice part is they have their own autonomous organization. 38

Global Gaming Business MARCH 2016

The sharing of technologies is likely to result in more products that bring the strengths of one to the market of another—or to new markets altogether.

Jay Sevigny works directly for Jamie (Odell). Where we work collaboratively across the business, it’s really been exciting—great for both parts of the company.” In the meantime, he says Aristocrat has been careful not to upset the very successful apple cart that Sevigny has governed in Tennessee for just over a year. “The interesting thing about VGT is that in many ways, it’s still operated as a stand-alone, autonomous organization,” he says. “And again, it was very wellrun, and from a cultural standpoint, the integration was seamless.” “Nothing’s changed,” Sevigny says. “In Tennessee we have the administrative functions, primarily because that’s where the founder and owner lived. And we have engineering activities there. In Oklahoma, we have significant assembly and service operations, and our sales force is really based out of there as well. But we do everything the same way. “Our customers tell us, to their delight, they haven’t perceived any change in their relationship with VGT, or the way that we service them. In fact, the only thing they see is that there’s now more opportunities for them, because of what our combined resources can do for better product on their floors. We have access now to a total of six studios across the world, where we now have game developers that are going to be involved in helping us with our games. That’s been the real exciting part for us.” For Aristocrat, the VGT addition strengthens a relationship with Indian Country that already was strong. “The tribal community knows us very well,” says Pierce, “not only our cabinets and content, but our systems—the majority of our systems business are tribal customers. Overall, more than 50 percent of our revenue comes from Native American gaming.” “The headline for all of this is that the experience has really been good,” says Sevigny, “and we’ve worked well. Our cultures are so compatible. We’ve had a couple of huge successes bundling Aristocrat products with VGT products, including the Oasis system. And our tribal customers benefit from this, because where you bring things together, they get more out of a deal, and we end up getting better contracts.” Even better ones to come, no doubt.

1st Class II On-Property Mobile Entertainment

• • • • •

Available for iPhone and Android User-friendly interface Integrated mobile wallet for ease of transactions Geolocation technology allows on-casino boundary access location Ability to offer value-added services such as casino offers, loyalty programs and purchase history • Delivers a user experience that drives players to install the casino’s mobile app • It’s fast, it’s rapid, it’s fun, it’s exciting *Availability dependent on approved jurisdictions. For more information, please email us at sales@spingames.net Respin LLC is a division of Spin Games LLC. spingames.net 100 Washington St., Ste 250, Reno, NV 89503, USA

SpinGames_GGB_MAR2016.indd 1

2/9/2016 2:46:26 PM

p. 40 tableGames:Layout 1 2/16/16 10:09 AM Page 40

TABLE GAMES

March Madness Here’s the bracketology for the table game championships

here’s an old notion that gamblers shy away from table games—and toward slot machines—because craps, blackjack, sic bo, et al. are just too gosh-darn complicated for their own good. Shut up, you old notion. Go outside and shake your fist at a cloud, why don’t you? Table games too complicated? More so than slots? Check your EPROM, pal. You’re on tilt. Table games are much, much, much easier to understand than slot machines. Beat the dealer? You win. Don’t? You lose. That’s it. Game over. Literally. But whatever. For the sake of argument, let’s humor this fantasy for a minute. If table games are indeed the kings of confusion, then who is the king of kings? Which is indeed the most confounding, perplexing, puzzling one out there? Hmmmm. And away we go, NCAA-bracket style:

ELITE EIGHT Three Card Poker vs. Blackjack: The most popular proprietary table game vs. the most popular public-domain table game. But as it turns out, this contest is no contest. Three Card Poker is pitifully simple: fold if you have less than Queen-Six-Four. Th- th- th- th- th- that’s all, folks. Blackjack, on the other hand, has an array of decisions (when to hit, stand, split, double, surrender) that require many hours—as opposed to one-tenth of a second—to memorize. Winner: Blackjack. Baccarat vs. Craps: Baccarat is a glorified coin flip. It’s 100 percent luck. Craps is also skill-free, but mastering the game requires a knowledge of more than 50 bets, some that are settled immediately and others that are settled at different points of the roll, and some that can be made only after something else happens first. Winner: Craps. Ultimate Texas Hold ‘em vs. Sic Bo: Ultimate Texas Hold ‘em is the youngest entry, while sic bo is the oldest. In fact, it’s so old that nobody knows its exact age. Could be 500. Could be 2,000. And sic bo is as straightforward 40

Global Gaming Business MARCH 2016

By Roger Snow

as it is ancient: we’re talking three-dice roulette. The dealer pops the dice (or spins them in a birdcage contraption) and reveals the results. Whereas sic bo has zero strategy, Ultimate has oodles: raising, checking, folding, counting outs. It’s by far the toughest table game ever to play perfectly, even if you’re Rain Man or Deep Blue. Winner: Ultimate Texas Hold ‘em. Pai Gow Poker vs. Roulette: Let’s see. One of these games has a funny name, a 53-card deck, a semi-wild Joker, no No. 4 on the layout, a complicated set of rules for the dealer’s hand, and a 19-to-20 payout. The other game has one ball and 38 pockets. Winner: Pai Gow Poker.

FINAL FOUR Blackjack vs. Craps: When Jimmy the Greek handicapped football for CBS in the 1970s and ’80s, he would list the keys to victory (running game, defensive line, coaching, etc.) and put a check mark next to the team he thought had the advantage. In the end, whoever had more checks would get the Greek’s nod. Paying homage to that, blackjack wins three matchups: mathematical complexity, mastering basic strategy and mastering advanced strategy (i.e., card counting). But craps prevails in four categories: difficulty to deal, difficulty to learn, physical demands (you have to stand) and physical dexterity (you have to throw the dice). Winner: Craps. Pai Gow Poker vs. Ultimate Texas Hold ‘em: No game in this field can run and gun with Ultimate Texas Hold ‘em when it comes to the difficulty of mastering advanced strategy. There are countless internet posts on how to bet, collude and even cheat your way to winning. If that were the sole criterion, this would be a blowout. Like UNLV 103, Duke 73. Pai gow poker, on the other hand, is just an allaround pain in the fanny. Besides everything mentioned in its round-of-eight rout of roulette, it also has the funkiest dealing procedure of any casino game. The first hand doesn’t

automatically go to the player farthest to the dealer’s left; instead it goes to the position chosen randomly. To make matters messier, the dealer must deliver all hands to all player positions, even if they are unoccupied. Winner: Pai Gow Poker.

CHAMPIONSHIP Craps vs. Pai Gow Poker: Innovation and automation have started to erode what makes pai gow poker so difficult to play and to deal. Forty percent of the tables are now equipped with a device that tells the dealer how to set his hand according to the prescribed house rules. (It can also help players do the same.) Plus, casinos are converting more and more games to “commission-free,” thus eliminating that oddball 19-to-20 payout. Shufflers and random-number generators are also helping to de-mystify the game. Craps, however, is stuck in a time warp. And apparently, that’s just the way it likes it. Nothing about the game is easy—playing it, dealing it, supervising it, surveilling it—and neither innovation nor automation is coming to the rescue anytime soon. Players must know when and where to drop their bets. They must know when to take odds, when to lay odds, and how much to put down to cover their action. And in that vein, they must know the differences among double-odds, full doubleodds and 3X-4X-5X odds. They must know pressing and power pressing. They must know placing and buying. They must know which bets are on and which bets are off after the shooter makes the point. And they must know, above all else, that you never, ever, ever shoot from “The Don’t.” Winner: Craps. Roger Snow is a senior vice president with Scientific Games. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Scientific Games Corporation or its affiliates.

DomiNator® cUrve – taKe tHe straiGHt liNe to sUccess

The impressive DOMINATOR® CuRve takes the gaming experience to another level. Its vertical 40” Full HD curve touchscreen provides for a seamless gaming flow and entirely new game concepts. • Progressive Standalone Jackpots • DOMINATOR® CuRve screen: 40” Full HD LeD backlight touchscreen for gripping graphics display • TouchDeck™ player interface • DOMINATOR® CuRve offers exclusively designed slot game stars

Novomatic americas sales llc Phone: +1 224 802 2974 sales@novomaticamericas.com, www.novomaticamericas.com

2016_022_IndianG_Curve BoR_US.indd 1

27.01.16 11:59

p. 44 disenrollment:Layout 1 2/16/16 10:18 AM Page 44

Tribal Gaming’s

Dirty Secret Casino “per caps” prompt “epidemic” of tribal disenrollments By Dave Palermo

ia Prickett and her family have always identified themselves as being American Indians, specifically descendants of Chief Tumulth, a leader of the Cascade people who hundreds of years ago fished the Columbia River in Oregon. But Prickett’s affiliation with the Confederated Tribes of the Grand Ronde ended last year when she reached into her mailbox and found a letter notifying her that she was being expelled from the tribe, which was itself terminated in the 1950s and re-established in 1983. “Being disenrolled is like being kicked in the teeth,” Prickett told Oregon Public Radio. “To have it (tribal enrollment) stripped away like this is just gutwrenching. It’s completely throwing away our family history and what we sacrificed for all of our tribe.” Mary Martinez, a former vice-chairwoman of the Picayune Rancheria of Chukchansi Indians near Fresno, California, was disenrolled from her tribe in 2007, a move she, like Prickett, contends was motivated by per-capita payments from tribal government casinos. “They kicked me to the curb so they could keep more money for themselves,” Martinez told SFGate. “Our ancestors would roll over in their graves if they knew.” Tribal disenrollments—largely unheard of prior to the birth of Indian gaming—soared when Congress enacted the Indian Gaming Regulatory Act (IGRA) in 1988, a trend most blame on the often-controversial practice of issuing per-capita payments from casino revenues. 44

Global Gaming Business MARCH 2016

Gathering Greed Professor David Wilkins of the University of Minnesota, a Lumbee Indian who tracks tribal enrollment disputes, says 69 of 245 tribes with casinos have recently slashed memberships or are in the process of doing so—an effort he suspects is aimed at increasing casino payments to remaining members of the indigenous communities. Wilkins estimates that tribes have ousted 4,000 to 8,000 Indians. Tribal attorney Gabriel Galandra, a member of the Round Valley Tribe of California who represents disenrolled Indians, puts the figure at 8,000, minimum. “The lack of transparency (among tribal governments) has made it difficult for us to verify exactly when disenrollments became an issue,” Wilkins says. “But disenrollments didn’t really come into play until the early 1990s. That coincides with gaming. “The number of disenrolling tribes begins to increase as gaming revenues begin to increase,” he says. Galandra is more succinct. “It’s about greed,” he says. IGRA has generated unprecedented social and economic progress in Indian Country. Tribes currently operate about 460 casinos in 28 states, a gambling industry that generates $28.5 billion a year, according to the National Indian Gaming Commission (NIGC) and other sources. But tribal leaders express almost unanimous disapproval of the dramatic increase in disenrollments by casino tribes issuing per-capita payments.

p. 44 disenrollment:Layout 1 2/16/16 10:18 AM Page 45

Frank Ducheneaux, one of the fathers of Indian gaming, says disenrollment is an unfortunate byproduct of per-capita distributions.

Indigenous Americans are pushing back, launching a “Stop Disenrollment” media campaign (www.stopdisenrollment.com) with such prominent commentators as Ojibwe environmental activist Winona LaDuke, Oklahoma Cherokee rap artist Litefoot, Lumbee author Robert Williams, Paiute artist-activist Gregg Deal and others. The group estimates that more than 80 of the 366 federally recognized tribes in the lower 48 states have disenrolled as many as 10,000 indigenous Americans. Frank Ducheneaux, a member of the Cheyenne River Sioux tribe who as counsel to the House Committee on Interior and Insular Affairs co-authored IGRA, says he did not expect the act to prompt a rash of disenrollments. “Disenrollment wasn’t a big issue back then,” Ducheneaux says. “I’m in general opposed to disenrollment, particularly when it’s related to per-capita. I don’t like it.” Indian nations historically were inclusive, adopting members—including African-American slaves—and resorting to kidnapping to ensure the sustainability of tribal communities. But disenrollments linked to gambling and per-capita payments are forcing indigenous communities to question what it really means to be an Indian.

Money Problems Disputes over per-capita payments are also impacting tribal budgets and politics, resulting in the ouster of longstanding, respected Indian leaders. And tribal advocates contend disenrollments often violate the civil rights and due process of native people, stripping them of housing, health care, pensions and government services. The U.S. Department of the Interior and federal courts generally do not get involved in tribal enrollment disputes, leaving ousted members with little judicial recourse. The National Native American Bar Association (NNABA), in a June 2015 resolution, noted “the right to tribal citizenship is increasingly under attack” and urged tribes to adopt due process rules, ordinances and ethics codes to fairly deal with disenrollment issues. Meanwhile, the NIGC has been chastised for failing to exercise its regulatory authority to investigate and act on reported violations of IGRA per-capita regulations tied to occasionally violent enrollment disputes. NIGC has taken just one enforcement action against a tribe related to per-capita payments since IGRA was adopted nearly 28 years ago. The American Association of Indian Physicians (AAIP), in an October resolution, linked disenrollments to depression and other mental health issues and called upon tribes to “reconsider their disenrollment decisions and consider restoring” ousted Indians to tribal membership. Perhaps most important, Indian advocates warn that per-capita payment abuses—coupled with blood quantum used in determining tribal enrollment— may eventually lead to federal termination of Native American tribes. “We are having a crisis of disenrollment,” Michelle Stanley, onetime council-

Ojibwe environmental activist Winona LaDuke is part of a group fighting to end tribal disenrollments.

woman for the Saginaw Chippewa Tribe of Michigan, told attendees of the 2015 National Congress of American Indians convention in San Diego. “I ask people to look into their hearts and look around. Historical members are being hurt by disenrollment.” Stanley was later disenrolled by her tribe. Joseph Hamilton, chairman of the Ramona Band of Cahuilla Indians in California, says the concept of tribal enrollment is foisted on indigenous nations by the federal government and runs contrary to the native view of tribalism. “I suppose a tribe has the right to extinguish itself, like some did in the 1950s, if it so chooses,” Hamilton wrote in a letter to Indian Country Today Media Network, referring to the federal policy of terminating tribes. “We’d better start talking about disenrollment and finding solutions before it is too late. “If we don’t talk and, more importantly, take some form of action,” Hamilton warns, “we run the real risk that Congress will exercise its plenary power over tribes and decide who is an Indian—an idea almost too scary to consider.”

IGRA and Tribal Membership The congressional intent of IGRA was to strengthen tribal governments and build diverse Indian economies. The act limits use of casino funds to achieve those goals. But IGRA also allows tribes to issue per-capita payments from casino funds. The U.S. Department of the Interior says 130 of 245 tribes with casinos have Interior-approved revenue allocation plans, or RAPs, permitting them to issue percapita payments to their members. In many cases, per-capita payments are minimal, amounting to less than $1,000 a year. This is particularly true of large-enrollment tribes with casinos on vast reservations in the Midwest and Western United States. But annual payments to members of small-enrollment tribes operating lucrative casinos on reservations and rancherias near urban areas can reach six figures or more. Not surprisingly, California has generated what Wilkins calls an “epidemic” of disenrollments. (See page 48.) California has 110 federally recognized tribes, more than any other state in the country. But most of them are small Indian bands with very little reservation land. Many of 60 California tribes operating casinos are tapping into lucrative Los Angeles, San Diego and San Francisco area markets. As a result, California casinos generate $7 billion a year, about a fourth of the take from Indian gambling nationwide. Because they have small reservations and rancherias, the incentive to invest in government services is minimal. Hence, monthly per-capita payments can amount to tens of thousands of dollars. Expelling members, Wilkins says, is a sure way to increase payments. Of the 69 tribes identified by Wilkins as culling their memberships, 27 are in MARCH 2016 www.ggbmagazine.com

p. 44 disenrollment:Layout 1 2/16/16 11:06 PM Page 46

Professor David Wilkins of the University of Minnesota says at least 8,000 tribal members have been ousted in recent years.

Former BIA chief Kevin Washburn says while often unfortunate, disenrollment is part of tribal governance and reflects the identity of the tribe.

NIGC and Per-Capita Payments California. At least 21 of those tribes are issuing per-capita payments, he says. “California is unique in several respects,” Wilkins says. “The pattern of disenrollment in California is very different from tribes in other states. In California, you’ve got this massive spiral of disenrollments that’s been going on since the late 1990s.” Enrollment squabbles at Chukchansi and the Paskenta Band of Nomlaki Indians near Sacramento turned violent. The Chukchansi Gold Resort was closed for more than a year following an armed confrontation in 2014 between tribal members. Some California tribal leaders contend disenrollments are symptomatic of long-negligent indigenous communities and government being strengthened with gambling resources. Enrollment audits, says one tribal leader, “are what you do to right the wrongs of the past.” Disenrollments outside California include Grand Ronde, Saginaw Chippewa Indian Tribe of Michigan, Nooksack Indian Tribe of Washington state, Narragansett Tribe of Rhode Island and the expulsion by the Cherokee Nation of more than 1,000 African-American freedmen.

Little Recourse for Tribal Outcasts The courts and federal Indian policy don’t give Indian outcasts much judicial recourse to contest their expulsions outside of Indian courts operated by the tribes disenrolling them. Mindful of a federal policy of tribal self-determination that began with President Richard Nixon in 1970, Interior has carefully balanced its trust responsibility for Indian tribes with respect for tribal sovereignty. Kevin Washburn, who late last year stepped down as Interior’s assistant secretary for Indian affairs, says he is “often dismayed” by casino tribes casting off members. But he supports a tribe’s right to determine membership. “This is one of the hardest questions in Indian policy today,” Washburn says. “Membership—the composition of a tribal community—is one of the most important questions of tribal identity. Nothing is closer to the heart of tribal self-governance than determining who is a tribal member. “I, too, am often dismayed by actions of tribal governments, and I see that tragedy sometimes results,” he says. “But asking the federal government to tell a tribe who is a member utterly ignores history. “The federal government has a lot of Indian blood on its hands. The federal government has made a lot of very consequential mistakes in Indian policy. This is why I believe so strongly in tribal self-governance.” The Indian Civil Rights Act of 1968 in many respects does away with tribal immunity against federal lawsuits. But the U.S. Supreme Court in Santa Clara Pueblo v. Martinez in 1978 upheld the right of indigenous governments to determine membership. Federal judges, however, are not blind to the issue. The 9th Circuit Court of Appeals, in a 2013 ruling upholding the right of the San Pasqual band to oust a tribal family, wrote, “Membership disputes have been proliferating in recent years, largely driven by the advent of Indian gaming.” Wilkins contends Interior has a trust responsibility not just for tribal governments, but for their citizens. Washburn rejects that position.

Global Gaming Business MARCH 2016

Disenrollment disputes are most often tied to per-capita payments. And under IGRA, the RAPs are subject to scrutiny by the NIGC. But the NIGC in the Obama administration has been decidedly pro-tribal, rarely issuing notices of violation (NOVs) on regulatory issues, including numerous reported instances of abuse of per-capita payments. “(NIGC) has for the last several years wholly refused to enforce IGRA to remedy or deter those abuses,” Galandra says. NIGC took remedial steps in the Chukchansi debacle only after state and federal officials moved to close the casino for public health reasons. And it declined to act in the Paskenta dispute despite the chairman at an April 2014 meeting summarily ousting tribal officials and enrolled members. Local police were called to maintain the peace. NIGC officials declined requests for interviews and instead issued a statement that said in part, “The agency will investigate, and has investigated several complaints over the last two years, where a tribe has allegedly distributed gaming revenue without a RAP or if a tribe makes distributions of gaming revenue in addition to what is permitted.” The agency also says it “has no jurisdiction to insert itself into a tribe’s enrollment decisions. Determination of tribal citizenship or membership is an inherent sovereign power not to be interfered with by the NIGC.” The statement on enrollment misses the point of contention. “The NIGC doesn’t need to get into enrollment issues per se,” Galandra says. “But it does have a statutory and regulatory (responsibility) to get involved in per-capita misuse when that misuse aids and abets disenrollment.” Galandra also believes Interior should reconsider how it balances its trust responsibility for tribes with the need to respect self-governance. “I respect Washburn’s position,” Galandra says. “But I don’t think Indian self-determination and the federal trust responsibility are mutually exclusive of one another, nor are they absolute. You have to exercise trust responsibility when confronted with a tribe not equipped to exercise self-governance. “In the instances of disenrollment we’re encountering I do not think the federal government can morally expose self-determination as a reason to not get involved. The federal government has both a legal trust obligation and a moral responsibility to get involved.”

Enrollment Audits for Profits Tribal enrollments and per-capita payments have given rise to firms and individuals specializing in auditing tribal memberships. James Mills, president of Creating Stronger Nations of New Hampshire, which consulted with the Picayune Indians of Chukchansi, denied in a telephone interview his company solicits tribes seeking to pare down membership. “First of all, my company was not founded after gaming. It was founded before gaming,” Mills said, giving 1990 as its date of origin. When reminded that IGRA was enacted two years earlier, in 1988, and tribes were engaged in unregulated gambling in the 1970s, Mills replied, “I recognized that IGRA came before that. But gaming was not what it is today, by any stretch of the imagination.” “You know what?” Mills said. “I don’t think I want to talk to you.” He hung up the phone.

Complete Hospitality Cloud The Integrated Cloud for Hotels & Casinos

Property Management Point of Sale Distribution

MICROS + Oracle Complete. Mobile. Secure.

oracle.com/hospitality or call 1.800.ORACLE.1

PUB NOTE: Please use center marks to align page.

Resize

8.375” x 10.875”

Job #: Ref #: Headline: Live: Trim: Bleed:

316M_IND00252_CmpltHSPCld_HtlCas_HSP_8.375x10.875 M_316M_IND00203_CmpltHSPCld_HtlCas_HSP_8x10.5 Complete Hospitality Cloud 7.625” x 10.125” 8.375” x 10.875” 8.625” x 11.125”

Fonts: Univers LT Std. 75 Black, 65 Bold, 55 Roman, 45 Light, 67 Bold Condensed, 57 Condensed

PRODUCTION NOTES

READER

LASER%

RELEASED

2/02 2016

Please examine these publication materials carefully. Any questions regarding the materials, please contact Darci Terlizzi (650) 506-9775

p. 44 disenrollment:Layout 1 2/16/16 10:18 AM Page 48

Brother vs. Brother

Are California tribes building governments or seeking profits? ome California American Indian tribes contend enrollment audits and expulsions are a result of strengthening tribal governments through gambling resources and not an effort to increase per-capita casino payments to remaining members. “It has nothing to do with money,” says Chairman Robert Smith of the Pala Band of Mission Indians. “Disenrollees can say what they want, but that is not true. Right is right, wrong is wrong, and they don’t meet the requirements to be enrolled.” Ousted Pala members disagree. “This is all about greed,” King Freeman, a onetime Pala tribal chairman who runs a general store near the tribe’s San Diego-area casino, told the Los Angeles Times. The Pechanga Band of Lusieño Indians says it has been “fighting false claims of citizenship” since the 1970s, long before the tribe opened a gambling hall in 1995. Resources from gambling have helped strengthen the tribal government, a function of which includes auditing enrollment. But two families of about 225 members ousted from the Pechanga Band in 2004 and 2006 claim their disenrollments were the result of greed and politics. California has more federal recognized Indian tribes (110) than any other state in the country. Sixty of the tribes operate casinos generating about $7 billion a year, roughly a fourth of the revenue grossed by Indian tribes through the country. About two dozen California tribes issuing per-capita checks from casino revenues have expelled families from membership rolls, according to University of Minnesota professor David Wilkins, increasing often lucrative payments for those that remained on the rolls. Expulsions by the Pechanga and Pala bands, San Pasqual Band of Mission Indians, Paskenta Band of Nomlaki Indians, Chukchansi, Redding and Robinson rancherias, Pinoleville and Ukiah Valley Pomo Indians and elsewhere in the state prompted intensive publicity. About 75 Pomo Indians were expelled from Dry Creek Rancheria in 2014 when a slumping economy caused a drop in per-capita payments.

A Tortured History Indigenous Californians suffered a particularly torturous history of enslavement, servitude and 48

Global Gaming Business MARCH 2016

Robert Smith, chairman of the Pala Band of Mission Indians, says disenrollment is simply about the bloodlines, not money

genocide linked to the Spanish missions in the 1700s and the Gold Rush of the 1840s, when militias hunted down and slaughtered Native Americans. The chronology of American Indians in California “was as close to genocide as any tribal people had faced, or would face, on the North American continent,” Alvin M. Josephy says in his book, 500 Nations. From a pre-European population of some 300,000, California natives in 1900 numbered about 16,000, many herded off ancestral lands— occasionally at gunpoint—and moved onto about 50 small reservations or “rancherias.” Many of the rancherias were then “terminated” by the federal government in the 1950s. Some were later restored. The complicated history of Southern California Indians—further muddled by Mexican and European settlement and intermarriage between Luiseño, Cahuilla, Kumeyaay, Serrano, Cupeño, Quechan and Juanenos clans—make tracing native ancestry extremely difficult. The birth of tribal high-stakes bingo in the late 1970s and early ’80s, followed by tribal-state compacted gambling with passage of Proposition 1A in 2000, enabled surviving Indian bands to begin rebuilding their fledgling governments. The effort apparently included reviewing membership audits. Several tribes were swamped with applications for membership, many from assimilated descendants of indigenous Californians. “Somewhere, as tribes have tried to reconstruct their sense of nationhood, particularly in tribes with casino money, they hit upon disenrollment as a way to settle disputes over personality issues and money,” Wilkins told the Los Angeles Times. Michael Madariaga, whose extended family was disenrolled by Pechanga in 2006, stripping them of health care, insurance and a sizeable monthly income, said the loss of community and native identity was most painful. “What matters is taking away our heritage,” he told USA Today. “It’s like taking your family and

Pechanga Chairman Mark Macarro says the band has been fighting false citizenship claims since before gaming was introduced

wiping them out of history.” Pechanga disenrollees—descendants of the late Paulina Hunter and Pablo Apis—contend the tribal government acted arbitrarily for political and financial reasons and violated their civil rights, a claim rejected by the federal courts. Hunter descendants said the tribe ignored an anthropology report solicited by an enrollment committee operating independent of the tribal council. The report discounted Hunter’s connection to San Luis Rey Mission, stating “virtually everyone in the tribe today descends” from the mission. The expulsion of the Hunter clan in 2006 reportedly upped the monthly per-capita payments to Pechanga citizens from $22,000 to more than $30,000. “Pechanga has been fighting false claims to citizenship since the 1970s,” Chairman Mark Macarro said in a prepared statement. “In 1988—seven years before Pechanga entered into gaming—the tribe approved a comprehensive tribal law on citizenship to investigate and adjudicate questions on whether persons had been wrongfully enrolled. “To settle longstanding questions about whether some individuals were of Pechanga ancestry, the enrollment committee undertook comprehensive investigations that lasted several years in order to determine whether or not these individuals were Pechanga descendants. “The tribal government has the capability to extensively verify and enforce constitutional requirements for citizenship. For many tribal families, the investigations proved their Pechanga lineage. Two families failed to prove Pechanga ancestry and were consequently removed from the tribe’s rolls. Historical documents show their ancestors were from the San Luis Rey Mission Indians. “Though deeply painful, the tribe has an obligation to uphold our laws and to protect the integrity of our citizenship.” —Dave Palermo

EXCLUSIVE INNOVATIVE

More EXCLUSIVE brands than anyone in the industry.

The most INNOVATIVE products available.

# TRENDING Top TRENDING merchandise in retail. HUNDREDS OF BRANDS SUCH AS:

VISIT US AT NIGA

BOOTH #1421 www.rymaxinc.com • 866.RYMAX.11

Incentive Solutions Delivered. Worldwide.

p. 50 iGamefeature:Layout 1 2/16/16 10:24 AM Page 50

Viva la Difference

BY STEVE RUDDOCK

Comparing and contrasting U.S. and European online gaming markets

mboldened by a 2011 Justice Department opinion by the Office of Legal Counsel (OLC) that limited the scope of the 1961 Wire Act to sports betting, the United States was finally able to dip its toes in the legal online gambling pool. In 2013, a trio of states, Nevada, Delaware and New Jersey, launched regulated online gaming sites, by copying the playbooks of several European countries. In many respects, these states copied the models already in place in Italy and France, but for all the similarities between the European and U.S. online gaming markets (such as ring-fencing, taxation and licensing fees), the legal U.S. markets diverge from their European brethren in several key ways, beginning with the level of government where legalization occurred.

Global Gaming Business MARCH 2016

National vs. State In France and Italy, the national government legalized online gaming, and it’s the national government that provides the regulation and oversight for their online gaming sites. In the U.S., the federal government isn’t involved in the legalization or regulation process. The OLC opinion was the federal government’s way of saying it will stay out of a state’s way if they decide to legalize online gambling within their borders. Because of this, each U.S. state has the capability to legalize online gambling, if they so desire, and determine how they will regulate it within their borders. So far only three states have done so, but this has already cre-

p. 50 iGamefeature:Layout 1 2/16/16 10:24 AM Page 51

ated a hodgepodge of licensing and regulatory models among the three earlyadopter states. For example, online poker is legal in all three states but online casino games are only legal in New Jersey and Delaware. Operators in multiple jurisdictions are required to possess licenses in each locale and must deal with separate regulatory agencies. And the tax rate imposed on operators is different in all three locales. State-level legalization also means online gambling is still more or less illegal in 47 states. These inconsistencies, which are not present in legal European markets, only serve to further confuse the general public. In segregated European markets like France and Italy, online gaming has never been implicitly or explicitly banned, and if it’s legal in Paris it’s also legal in Calais or Toulouse. Because of this, it’s much easier for Europeans to wrap their heads around the government legalizing online gambling. These inconsistencies and state of confusion have led to several existential problems in U.S. online gaming markets. First, the cloud of the 2006 Unlawful Internet Gaming Enforcement Act continues to swirl above the industry, causing consternation among banks and potential payment processors, many of whom continue to prohibit online gambling transactions in legal markets. Second, the oft-questioned legal status of online gaming among the general population has led to failed marketing campaigns.

It Looks Like A Duck But Moos Like A Cow For the most part, the licensed U.S. online gaming sites that sprang into being looked like the products in place in Europe and previously seen in the unregulated U.S. market, but it quickly became apparent that these weren’t your older sibling’s online poker rooms and online casinos. According to Matt Davey, the CEO of NYX Gaming Group, “The U.S. iGaming regulations were initially based upon those that were drafted outside of the U.S. Though they were then filtered through the lenses of the various landbased regulations and became more conservative in their application, much of the original intent, definition and levers remain the same.” “There are more similarities than differences between international and U.S. markets when it comes to online real-money gambling,” says Thomas Winter, vice president of online gaming for Golden Nugget. Winter, who has experience in Europe and the U.S. iGaming markets, lists user experience, new and quality content and superior customer service and VIP management as key similarities, and the “recipe for success” in any market. Winter says the main differences are in player acquisition and, to some degree, promotions. He describes New Jersey players as “more sensitive to promotions,” but with a willingness to “spend more and show more loyalty if you provide them with a reliable product and good customer service.”

Another difference Winter cites is marketing. “Marketing in New Jersey is very challenging when compared to regulated international markets,” Winter says. “All operators have learned to play with these constraints, but the cost of acquisition remains very high compared to international standards. A higher revenue per player partly offsets that, but at some point we’ll see diminishing returns and tier-two operators are likely to struggle.” Winter goes on to explain how this added cost is compounded by the logistics of marketing in New Jersey. “In terms of digital marketing, Google still prevents operators from buying adwords, and there are only a limited number of affiliates,” Winter says, adding, “Facebook offers an alternative to Google but only to a certain extent. Above the line, broadcast TV forces you to buy New York and Philadelphia, where customers can’t play. Same for radio in North Jersey.”

Stricter Regulations Another key difference between the U.S. and Europe are the far stricter regulations imposed by U.S. regulators. The newly implemented regulations, put in place to protect customers and to ensure the sites were not being frequented by minors, problem gamblers or residents from other states, fundamentally changed the online gaming experience for U.S. players. Potential customers are now required to divulge their Social Security numbers during the registration process and accept the issuance of W2-G tax forms for slot wins over $1,200 and table game wins over $5,000. Furthermore, because of the nascency of the industry and the strict regulations, technical difficulties were rampant in the early days. Standard website features, from online poker waiting lists to mobile technology, were still unapproved at launch. The multi-layered geolocation technology being used was untested in a real-world setting. And complicating matters was the decision by state regulators and operators to err on the side of caution on every front, as widespread breaches were believed to have the potential to bring the whole thing crashing down. “As New Jersey was the first to take the risk for real-money casino iGaming in the U.S., it is not surprising that in its inception they took a very conservative approach, as it’s better to prevent 100 percent of who shouldn’t be playing, versus making it more difficult for some who should be allowed to play,” Davey says. “Thus, the extensive KYC (know your customer) process, the requirement for full federal tax ID for each patron during registration and geolocation software downloads as part of the experience are all contributing factors to ensure New Jersey starts off on the right foot.”

Contingency Plans As Davey explains, because of these challenges, many operators are now re-evaluating their early business models. “New Jersey was a perfect storm,” Davey says. “In a positive fashion, it was MARCH 2016 www.ggbmagazine.com

p. 50 iGamefeature:Layout 1 2/16/16 10:24 AM Page 52

“With a couple of years under their belt, many land-based casinos are now re-evaluating their decisions and looking for ways to retake control of their brand and online initiatives.” —Matt Davey, CEO, NYX Gaming Group

the first U.S. state to give us all the opportunity to enter the market. On the other hand are the barriers associated with the registration, KYC and payments processes, combined with the facts that geographic state borders limit player pool sizes and the land-based operators (who hold the required licenses) were all holding out for exclusive relationships. “As the land-based operators are now learning, due to the New Jersey market results (or lack thereof) and corporate primary objectives, most of the B2C partners available in the market are not heavily focusing on their own needs in the New Jersey market, let alone their land-based license partners whose business they’re also responsible for operating.” Davey says his company, which provides the online casino platform for both Resorts Casino and Golden Nugget, has taken a different approach. “With a couple of years under their belt, many land-based casinos are now re-evaluating their decisions and looking for ways to retake control of their brand and online initiatives,” Davey says. “As this process starts, NYX has benefited from its commitment to offer a completely open and agnostic B2B solution, offering land-based casinos the most flexible and competitive platform option. In addition, NYX’s commitment to mobile-first content has seen positive results, as each month, more and more of the market is being exposed to iGaming via that channel.”

Bright Future After a nearly flawless two-year track record, the New Jersey Division of Gaming Enforcement has been working hand in hand with the state’s online gaming operators to simplify the registration and verification processes, and make a new customer’s experience as smooth as possible, without relaxing their highly effective consumer protections. As Winter says, “We saw a nice uptick when we started to ask for only the last four digits of the Social Security number.” And Winter believes these improvements in New Jersey will pay off in spades in other states. “When Pennsylvania or other states regulate, they’ll benefit from the New Jersey learning curve, on registration but also geolocation, where the technology has vastly improved. Both are still limiting factors in the market growth, but probably no more than 5-15 percent.” By 2020, Davey envisions a vastly changed iGaming landscape. “Though still not at a revenue level that warrants the attention of Europe, the U.S. market will have finally matured to a level of public awareness of its existence (due to a tipping point of enough states opening open up regulation),” Davey forecasts. “The suppliers and banks will have resolved the critical initial barriers associated with sign-up, KYC and payments; the social and moral opponents will have lost interest and focused their efforts on the next newsworthy target; mobile will be the dominant patron interface; land-based casinos will still be in the driver’s seat with regards to market share and will be building internal teams to take on more of the responsibility and control; 52

Global Gaming Business MARCH 2016

and multi-state poker network compacts will be in deep negotiation.” Despite the continued improvements, in some respects the damage was already done, and re-engaging with disillusioned players will be a heavy and expensive lift, made all the more difficult by the lack of a strong affiliate presence.

Are Affiliates the Missing Link? Affiliates have been a vital driver of traffic to online gaming sites since the industry’s earliest days, but the strict regulations in the three legal U.S. states also extend to affiliates. Affiliates in regulated U.S. markets must be licensed, or operate under a licensed affiliate, which means handing over a percentage of your revenue to the licensed affiliate in most cases. Jeremy Enke, a longtime affiliate in the online gaming industry who now works for Pala Interactive, notes that the procedure to receive an affiliate license in New Jersey includes a non-refundable $2,000 up-front fee for an elevated license application as well as a deep background check, including fingerprints and several years of past tax returns. Couple this cost and invasive vetting process with the relatively small size of these markets, and it’s unsurprising that many affiliates continue to promote offshore unregulated sites in lieu of the legal U.S. markets. This creates two problems. There are not only fewer affiliates for licensed online gaming sites, but affiliates marketing offshore sites are siphoning players from the legal industry. Winter says that while it’s difficult to quantify, the impact offshore sites are having on the U.S. market “could account for 30 percent of the current legal market, if not more.” Adam Small, cofounder of PocketFives.com, sees the legal U.S. affiliate market as a tough but not impossible undertaking, but one probably not suited for many affiliates. “In fenced-in markets like an individual U.S. state, you’ve got to have content that creates loyalty among a local audience,” Small says. “That can be expensive for affiliates, particularly when talking about smaller markets like the currently available U.S. states. But if you can find a formula that’s cost-effective and has sustainable local appeal, you can make these markets work.” Income Access CEO Nicky Senyard indicates that the lack of affiliates in New Jersey, coupled with the newness of the market, has created a void in “digital real estate,” and partially explains why consumer awareness has lagged. However, like most of the market’s early barriers, this is a situation that also seems to be improving, according to Winter. On the affiliate front, “we see small and slow progress here but still progress,” Winter says, indicating that affiliates now account for 10 percent to 15 percent of player acquisitions, compared to about 5 percent 18 months ago. Winter adds, “It will be difficult to get to the 25 percent-to-30 percent ratios typical in Europe, until you have many more states regulating. For most affiliates, the market is still too small.”

B:8.625” T:8.375”

B:11.375” T:11.125”

Get your entire casino operation in SYNK. SYNKROS delivers unparalleled power—from highly targeted marketing that drives desired consumer behavior to accurate data collection, adaptable floor management, analytics and accounting. Because when you can take full control of your floor, keep players engaged and profits spinning, you’re not just in synk… You’re in SYNKROS. Learn more at gaming.konami.com/SYNKROS

KO_Synkros_GGB_Ad_8375x11125.indd Saved at

Fonts & Images

Job info Live Trim Bleed

Printed At

2-9-2016 12:30 PM

None 8.375” x 11.125” 8.625” x 11.375”

Fonts Helvetica Neue LT Std (65 Medium, 35 Thin) Images concerto_powerofmagnetism_new_background.psd (CMYK; 381 ppi; 104.94%), Syncros_print ad_2016.psd (CMYK; 306 ppi; 23.52%), synkros_3d_finalCMYK copy.ai (15.52%) Inks Cyan,

Magenta,

Yellow,

Black

None

p. 54 igna:Layout 1 2/16/16 10:25 AM Page 54

iGAMING NORTH AMERICA

Sausage Ingredients Public policy is a sweet but ugly thing, and sometimes it works

By Sue Schneider

his is the confession of an avowed longtime policy junkie. I love to watch (and advocate for) laws being made. The nuances of the language, the parrying of interest groups, the political jockeying of the legislators themselves, it all fascinates me. It’s often an ugly process. Most of you have heard the old Bismarck quote: “Laws are like sausages; it is better not to see them being made.” I’ve had the opportunity to work on advocacy efforts on a weird variety of topics including services for troubled youth, women’s issues, flood plain development and internet gambling. (I’ve rambled a bit in my career.) With much pleasure, I had the chance to found and chair the Interactive Gaming Council (IGC) from 1996 to 2004. In its heyday, this organization had over 120 companies as members and attempted to develop standards and do other things to position the fledgling industry. The fact that I chaired it as long as I did is not really a testament to my leadership but a function of an industry under siege. Our members, primarily offshore suppliers and operators, did not want to be the face of the industry for obvious reasons. As a publisher and event organizer, I had the freedom to do that. In its early days, the industry had few friends. Getting legislators to stick their necks out to advocate for the industry was nearly an impossible task… even under the guise of consumer protection. So shooting for proactive legislation was a pipe dream. The best we could hope for was fending off the prohibition bills routinely offered up by Senator Kyl and Representative Goodlatte, et al. In spite of being up against such idioms as “Click the Mouse, Lose the House,” we

were able to hold them off for many years. But, as in the sausage-making analogy noted earlier, that was all undone in 2006, when the Unlawful Internet Gambling Enforcement Act (UIGEA) was passed literally in the dead of night. Called at the time the Frist Amendment (since it was a favor for Iowa Senator Bill Frist, who was running for president), this legislation shut down payments for iGaming. It did so with no hearings and in what those in the business called “a midnight drop,” quietly stuck into a “must pass” bill. So the industry has been living with this prohibition since 2006. There has obviously been some positive progress on the state level, with three states (New Jersey, Delaware and Nevada) leading the way to legalize iGaming. But progress has been painfully slow in the past year or so. One prospective state, California, has been introducing legislation to regulate online poker now for eight years with no forward movement. Most insiders point to ongoing wrangling among the land-based gaming interests as to who gets what slice of the pie as the reason for the impasse. Fights among card rooms, tribes and racetracks have impeded legalization. Now, fast-forward to the daily fantasy sports (DFS) controversies. Those of us who attended G2E 2015 heard the storyline on DFS before all hell broke loose. Since early October, the landscape for DFS has changed dramatically. Some have asked if DFS will follow the same legal path as online poker. I would argue that it’s already eclipsed it dramatically. A case in point is California. Internet poker advocates have been introducing legislation to regulate, license and tax internet poker for over eight years. But the conflicts among the stakeholders, as mentioned before, have scared lawmakers from action. Frankly, if the industry cannot provide a united front, a state legislator is not inclined to stick his or her neck out. But a DFS bill is moving forward quickly in

“Some have asked if DFS will follow the same legal path as online poker. I would argue that it’s already eclipsed it dramatically. A case in point is California.”

Global Gaming Business MARCH 2016

California. It passed the Assembly almost unanimously with only one dissenting vote. The tribal gaming organization in that state and the national Poker Players Alliance have cried foul, saying they should get poker up and running first. But, this industry suffers from a true lack of advocacy and leadership in that regard. When the American Gaming Association pulled out of advocating for iGaming due to internal conflicts on the issue, there was a true vacuum which has impeded our industry’s growth in the U.S. regulated market. Why the immediate results for daily fantasy sports? It’s anyone’s guess, really. It’s a widely popular pastime and has been for a very long time. (I was not surprised at the fantasy sports exemption in UIGEA when I was lobbying on Capitol Hill, since many staffers I met with had their fantasy sports screens up on their computers when we met.) Perhaps, that popularity alone accounts for the speed of action... especially if it’s the lawmakers themselves. Or perhaps the DFS industry has somehow (quietly, for sure) activated a more vocal constituency of their players to speak out than poker has. We’ll also be watching the policy efforts on behalf of legalized sports betting in the U.S. To me, there is a perfect storm developing led by the change of attitude of many of the sports leagues (sans the NFL and NCAA). Add to that the popularity of DFS, which admittedly is one step away from sports betting. And a handful of states, looking for additional revenue sources, are already drafting legislation to allow sports betting should the federal prohibition be repealed or tweaked to allow it. So, can we get it together as an industry? Possibly. Given our past experience, I’m not inclined to bet on it. But we can always hope, and find some ways to work together to make it happen. Sue Schneider is one of the pioneers of iGaming. She is the founder of the iGaming North America conference and is also editor of Gaming Law Review and Economics.

p. 56 igames:Layout 1 2/16/16 10:25 AM Page 56

Amaya CEO Makes Bid to Buy Company Amaya board forms committee to consider offer

maya, Inc., owner of the world’s largest online poker company PokerStars, announced that David Baazov, the company’s CEO, is offering to buy out all the shares of the company and take it private in an all-cash deal worth $2 billion. The Montreal-based company said in a statement that Baazov and an unnamed group of investors are putting in a takeover bid of C$21 per share, for a total of C$2.8 billion, or US$2 billion. The offer price is a 40 percent premium over Amaya’s closing price on the Toronto Stock Exchange the day of the offer. While Amaya’s shares soared 27 percent to $19 in early trading, it ended the day at $18, a 20 percent rise. Some analysts speculated that the wavering share price indicates the $21-per-share offer is too low. In an interview with Bloomberg, Maher Yaghi, a Montreal-based analyst with Desjardins Capital Markets, pointed out that the offer is well below his own previous value estimate for Amaya of C$28 per share, and its peak share price last year of C$37.28. Baazov has been aggressive in building up Amaya’s fortunes since taking over as CEO in 2006, conducting acquisitions of iGaming companies like Calgary-based Chartwell Technologies, Ireland’s Cryptologic and B2B poker network Ongame, as well as acquiring U.S. Class II slot supplier Cadillac Jack, prior to acquiring PokerStars in 2014 to become the biggest player in the $4 billion global online poker business. Amaya subsequently sold Ongame to NYX Gaming and Cadillac Jack to AGS as it transitioned to a pure B2C company. Last year, Amaya’s Canadian-listed shares dropped 39 percent as the iPoker market evolved and the U.S. dollar strengthened. Baazov has responded by building up his own stake in the company, currently at 19 percent. Amaya’s statement confirmed Baazov’s plans, but indicated that nothing is formal yet. “The board of directors of Amaya has established a special committee of independent directors to review any proposal that may be forthcoming, as well as other alternatives that may become available to Amaya,” the statement said. Amaya’s lead inde56

Global Gaming Business MARCH 2016

pendent director, Dave Gadhia, will chair the special committee. Amaya acquired PokerStars two years after the company’s former owners paid a $731 million noncriminal settlement to the U.S. Department of Justice over the April 2011 Black Friday crackdown on illegal internet gaming. Amaya bought PokerStars and Full Tilt from Rational David Baazov Amaya, Inc. CEO Group two years ago, and Baazov has spent much of the ensuing time clearing the name of the PokerStars brand in the U.S., where the company was among those that continued to operate U.S.-facing sites after passage of the 2006 Unlawful Internet Gambling Enforcement Act. Amaya is still facing “badactor” clauses in states considering internet gaming, despite the fact that Baazov purged all the former PokerStars ownership and executive team. Having been found suitable by New Jersey regulatory authorities, PokerStars is now implementing a new multi-pronged business strategy including online casinos, a sports betting platform, BetStars, and a new daily fantasy sports brand.

California Tribes Bid to Combine iPoker and DFS DFS bill races through legislature while iPoker languishes

alifornia’s Native American interests are reportedly looking into the impact of daily fantasy sports, according to a report on Legalsportsreport.com. Tribes need to reach consensus on internet gambling in the face of changing market demographics and pending legislation on sports wagering, daily fantasy sports and iPoker, the chairman of the California Nations Indian Gaming Association said. “The internet looms large in the future of gaming, therefore our future,” CNIGA Chairman Steve Stallings told delegates to the association’s

annual meeting. “Whether it’s iPoker, daily fantasy sports or sports wagering, we are going to have to face this digital monster. My hope is that we can find a way to be unified on this new political battlefield.” The report said a meeting has been scheduled between leaders of several of the state’s 60 casino tribes and state Assemblyman Adam Gray, sponsor of three pieces of legislation to regulate and tax sports wagering, DFS and iPoker. California’s bill to regulate daily fantasy sports sites has been passed by the state Assembly and awaits a vote in the state Senate. According to other reports, the San Manuel Band of Mission Indians and Morongo Band of Mission Indians both sent letters to Gray saying they feel the bill is advancing too quickly and deserves the same amount of debate the state has had on online poker. The tribes are part of a consortium of tribes and poker rooms that have sought to have iPoker legalized in the state. But opposition from other tribes, most notably Agua Caliente and Pechanga, has put the measure in limbo. The DFS issue may force them California Assemblyman Adam Gray to unite, however.

GVC Holdings Completes Bwin.Party Acquisition New Jersey partnership can continue

VC Holdings has completed its $ 1.6 billion acquisition of bwin.party, and also got good news in New Jersey where gambling regulators said PartyPoker can continue operating while GVC seeks a state gaming license. The news comes after reports that the Borgata—which is the leader in online gaming in the state and partnered there with bwin—was worried about GVC’s licensing and considering finding a new online partner. The ruling by the state Division of Gaming Enforcement means the relationship between Borgata and PartyPoker in the state can continue for now. The change in ownership of bwin could have created problems for the company’s operation in New Jersey as GVC must go through the state’s licensing process. Borgata representatives were re-

p. 56 igames:Layout 1 2/16/16 10:25 AM Page 57

portedly looking for potential partners in case the DGE ordered bwin to close its business during the inquiry period. Prior to the bwin purchase, GVC (or predecessor companies) reportedly operated some U.S.-facing gambling sites that continued to accept wagers after the passage of the Unlawful Internet Gambling Enforcement Act of 2006. Under the agreement with the DGE, GVC executives are prohibited from having any communication or managerial control over bwin.party. Borgata and bwin’s PartyPoker have been in a tight battle for the lead in New Jersey’s online poker market with the partnership between WSOP.com—through connection to Caesars Atlantic City Casino— and 888 Holdings. GVC beat out a competing bid from 888 to take over bwin. The New Jersey market is also anticipating the arrival of PokerStars in the state, through its partnership with Resorts casino. In New Jersey, online operators must partner with an Atlantic City brick-and-mortar casino. The DGE will now conduct a full licensing review of GVC.

Portugal Closes Online Poker Sites Only licensed sites can operate within the country

report in Portuguese newspaper Diário de Noticias says that the government of Portugal has closed about 86 online gambling sites in the last six months. Most of the sites offered online poker. The crackdown came after Portugal began requiring online gambling sites be licensed. However, Portugal’s gaming regulators have not issued any new licenses although at least 11 sites have applied. The paper reported that online players have been left in the dark over what sites to play, and at least 50 players interviewed by the paper have moved out of Portugal to find legal games. Czech Republic, Brazil, Hungary, Malta and the U.K. are the top five destinations chosen by the players, according to the paper. “The bureaucracy is huge and the process takes a long time, and it is a very complicated situation for the players,” João Nunes, head of the largest poker website in Portugal, told the newspaper.

MARCH 2016 www.ggbmagazine.com

p. 58, 59 emerging:Layout 1 2/16/16 10:26 AM Page 58

EMERGING LEADERS Decision Maker David Jacoby Chief Operating Officer, Lucky Dragon he courage and willingness to take risks has allowed David Jacoby to not just grow, but excel within the gaming industry. Jacoby currently serves as the chief operating officer at the Lucky Dragon, a large-scale integrated resort that is currently under development in Las Vegas. Jacoby also assisted in the formation of the Las Vegas Economic Impact Regional Center, which is a federally licensed vehicle utilized to raise EB-5 financing from non-U.S. investors for the Lucky Dragon as well as additional properties across the nation. When Jacoby graduated from the University of Pennsylvania with his bachelor’s degree in economics and communications, he moved to New York City and got a job with Jaffoni Consulting, an investor relations financial consulting company that worked across many industries. One of the company’s largest sectors was the gaming industry, where he was staffed. As Jacoby’s first job out of college, he was provided a crash course on the gaming industry, and benefited from keeping in contact with high-level executives within gaming operators, manufacturers and other industry players. “I was drawn to the industry because there’s always something new to be challenged with, and it’s such a broad, interdisciplinary type of field,” he says. “There’s a lot to put together, and that was always very interesting to me.” Working as a consultant, Jacoby eventually realized that consulting was not his passion, as he was unable to truly immerse himself into the industry. “I was always telling other people what other people were doing. I wanted to be making decisions myself rather than relaying the results of decisions that other people were making.” This realization led to a decision, which has had the largest impact on his career to date. “I knew coming from my role as a consultant I didn’t quite have the background to move into development,” he says. “I knew the industry broadly but I didn’t understand a lot of the specifics of development.” To gain an understanding of these aspects, Jacoby worked toward his master’s degree in real estate finance and investment from the School of Hotel Management at Cornell University. “At the time it was very risky but, in retrospect, it was a no-brainer. “What I would say for people entering the gaming industry: take a look at what your long-term ascension will be in the gaming industry,” he says. “Think two jobs ahead and look at what your path is to get there.” Jacoby cautioned that sometimes thinking this far ahead could lead to decisions of leaving companies you love or people you admire, but ultimately these risks could end up being the best decisions in your career. “Really think about what you want to do—and it may take some time working in different roles to figure out what that is—and don’t be afraid to take some risks to get there,” says Jacoby. Jacoby anticipates the next 12 to 18 months to be the busiest and most exciting part of his career, as the opening of Lucky Dragon comes closer and critical decisions are put in front of him. “Inevitably, a few things won’t work right and we’ll have to tweak them and right the ship accordingly.” —Joe Dimino, The Innovation Group

Global Gaming Business MARCH 2016

Versatility as a Virtue Jacob Lanning Vice President of Strategic R&D and Sales Strategy, IGT ersatility is an incredibly important skill to have in the multi-faceted gaming industry, and Jacob Lanning is an excellent example of how adaptability can pave the way for opportunity and success. Having started his gaming career as an assistant slot manager over a decade ago, Jacob now serves as vice president of strategic R&D and sales strategy at leading slot manufacturer International Game Technology. Although he has only been with IGT for under three years, Lanning has shown his versatility through the various positions he has held with the company, with vice president of global product management the most recent position before his current role. Prior to his time at IGT, Lanning spent most of his career working at MGM Resorts International and the Cosmopolitan of Las Vegas, where he held various positions in slot operations and management. Lanning graduated from the University of Nevada, Las Vegas with a bachelor’s degree in communications and went on to receive an MBA in finance from his alma mater. While earning his master’s degree, Lanning served as an assistant slot manager at Bellagio, where he began to build his passion not just for the gaming industry as a whole, but also for the technology behind gaming machines. “Over time, I really became enamored with gaming technology and creating great player experiences,” he says. “I got involved with a number of critical projects that refreshed the technology infrastructure at MGM Resorts International (including player tracking and ticket-in/ticket-out), and those experiences really cemented my love for the gaming industry.” Although he is clearly passionate about his career, Lanning recognizes that there are challenges that must be overcome when working with the technological side of the gaming industry. “Gaming has a unique challenge in terms of the speed with which technology moves relative to other industries,” he says. “Taking a new product to market is a delicate balance of regulatory considerations, the immediate needs of the consumer and the desire to re-invent.”

p. 58, 59 emerging:Layout 1 2/16/16 10:26 AM Page 59

Data Driven John Policicchio Senior Vice President of Marketing, MotorCity Casino Hotel ince he was a child, John Policicchio, the new senior vice president of marketing at MotorCity Casino Hotel, has been enamored with the gaming industry he grew up seeing in casino movies. While this nostalgia may have had a part in jump-starting his career in the gaming industry, Policicchio quickly learned how data-rich the industry is, and the sheer amount of information that is available when making decisions. “There is a lot of data that helps when making business decisions on a monthly basis, which keeps it really interesting all the time,” he says. In Policicchio’s opinion, the marketing department has its own set of challenges within the gaming industry. “You’re trying to always do more with every dollar of your promotional offers to maximize the impact on the bottom line,” he says. “There’s a bucket of promotion types that you can run, but you want to try and keep it compelling for your players while actually being able to execute.” This becomes challenging, because it is not practical to change entire marketing strategies on a monthly basis. For example, from a regulatory standpoint, once you have figured out what you want to do, promotions must be submitted 30 to 60 days before they can actually come to fruition. As experienced by many up-and-coming executives, Policicchio’s biggest career challenge to date was figuring out his personal leadership style. “You realize this is the type of leader that I am; this is how I want to balance being personable and friendly and helping my team grow, while making the right decisions for the business and making sure everyone is doing what they need to,” Policicchio says. In addition to one’s overall style, Policicchio believes it is also important to understand that everyone is different and, as such, “everyone has their own strengths, weaknesses and, most importantly, unique needs, etc., and figuring this out was probably the most challenging, but also the most rewarding thing for me.” Policicchio’s entrance into the gaming in-

“If there is one piece of advice that I would offer someone early in his or her gaming career, it would be to work in as many different positions as you possibly can to find the area that really excites you.” Lanning has had the privilege of working with many mentors over the years. One mentor in particular sticks out to Lanning. “One of my standout mentors was Mike Volkert, who I worked with for more than eight years,” he says. “He taught me a significant amount about the casino business, the importance of delivering value and how to execute complex projects on time and on budget.” To those who are looking to get started in the gaming industry, Lanning recommends working in various roles, like he did, to find your true passion within the industry. “If there is one piece of advice that I would offer someone early in his or her gaming career, it would be to work in as many different positions as you possibly can to find the area that really excites you.” Between Lanning’s ever-growing experience and strong determination, his continued success in the gaming industry is assured. Having accomplished so much under the age of 40, his experience will only continue to grow, and he will likely become a mentor himself to serve as a source of inspiration for many others looking to find their true passion in the gaming industry. —Stephanie Adkison, The Innovation Group

dustry came when Jenny Holaday, now president of MotorCity, hired him as a digital marketing manager in May 2010. Holaday has become the most influential mentor in Policicchio’s career by taking him under her wing and advising him on the additional talents and skills needed to excel in his career. “I wouldn’t be where I am today without Jenny’s mentoring, support and, what I appreciate most, her time,” Policicchio says. “Honestly, I would put ‘find an executive champion’ pretty high on the list of things you should do to advance your career.” Policicchio’s advice to other emerging leaders in the gaming industry is to be comfortable in understanding your abilities, which includes knowing when to admit you do not know something. “When you don’t know something, you say ‘I don’t know,’” he says. “It’s pretty straightforward, but it’s a lot better than trying to make something up on the spot or trying to make yourself sound like you know something that you don’t. Just say ‘I don’t know, and I’m on it.’” Additionally, he suggests keeping an open mind and not accepting industry trends and practices simply because they have worked in the past. Moving forward, Policicchio is curious to see how the market performs in terms of growth, both in the gaming industry and in the city itself. There’s a new hockey arena being built in Detroit, surrounded by an entirely new entertainment district, right down the street from MotorCity Casino Hotel. “Over the past year or two,” says Policicchio, “Detroit has been on the upswing, and the local gaming market has been improving. I’m really excited to see what’s going to happen in the next couple of years.” —Joe Dimino, The Innovation Group

MARCH 2016 www.ggbmagazine.com

p. 60 ngr march:Layout 1 2/16/16 10:27 AM Page 60

NEW GAME REVIEW by Frank Legato

Bonus Attack Everi

his new progressive video slot contains several firsts for Everi and for the slot business. It’s the first game to be released exclusively on Everi’s new Core HDX cabinet, which features dual high-definition monitors, an ergonomic design with monitors close to the player, vastly improved sound over previous platforms, and dynamic lighting against a black background surrounding the oversized vertical monitor, giving the whole presentation a cinematic feel. It also is the first game to employ a new feature called “Everi Bet.” This is a feature allowing operators to select any percentage program without affecting the best features or jackpot frequency of the game. For players, it means the higher the bet, the higher the progressive jackpot levels. On this particular game, there are 10 levels of progressives, and players will see the jackpots rise as they wager more. The base game is a five-reel, 40-line video slot with classic fruit and 7 symbols, with wild symbols added to the mix. But as the game title indicates, this game centers around the

Gold Dragon Red Dragon AGS

his new video slot applies two of the most popular AGS game features in “Fierce Factor” and “PowerXStream.” Fierce Factor is a feature that raises the pays with higher bets—the pay-table amounts rise with the wager. PowerXStream is a scatter-pay reel setup with four spots on each of the inner three reels and three spots on each of the outer reels. The reel setup results in 576 possible winning combinations on each spin. Wins are registered through adjacent symbols; there are no paylines. This game is based on the popular White Buffalo AGS theme, but with higher volatility. Wins in the primary game are evaluated both left-to-right and right-to-left starting with the outer reels, and each symbol combination has a base pay value that is multiplied by the number of instances of that symbol in 60

Global Gaming Business MARCH 2016

bonus, which happens very frequently when the player lands five “Bonus Attack” symbols scattered on the reels. This triggers a free-spin round tied to the 10 progressive jackpot levels on the top screen—the levels adjusted, of course, according to the wager. Triggering the bonus alone grants a random credit award of up to 25 times the total bet. From there, free spins can take the player up the ladder of progressives, according to the number of Bonus Attack symbols landing on each spin, beginning with the lowest jackpot for one of the symbols and rising to the top progressive for 10 symbols. The free spins continue as long as the player achieves the next level of progressive, up to a maximum of 103 free games or achievement of the 10th jackpot level—which carries a bonus award of 500 times the bet. Manufacturer: Everi Platform: Core HDX Format: Five-reel, 40-line video slot Denomination: .01-1.00 Max Bet: 300 Top Award: 173,100 credits Hit Frequency: 39.75%-42.2% Theoretical Hold: 5.07%-14.01%

the winning combination. For instance, one Gold Dragon symbol on each of three reels pays 30 credits, but a Gold Dragon symbol on the first reel, two on the second and three on the third returns 180 credits. The primary game also features “Streaming Stacks.” Each spin, a random symbol per reel is selected to appear in a stack. When a full stack of high-paying or wild symbols appears on the middle reels, special animation heralds the higher payout. Bonus symbols scattered on the inner reels trigger eight free spins, but the bonus symbols appear very frequently in the free spins as well, up to a possible maximum of 128 free games. Manufacturer: AGS Platform: G Series Format: Five-reel, 576-ways-to-win video slot Denomination: .01 Max Bet: 500 Top Award: 200,000 credits times line bet Hit Frequency: Approximately 50% Theoretical Hold: 5.07%-14.01%

Project1:Layout 1 2/15/16 3:32 PM Page 1

p. 60 ngr march:Layout 1 2/16/16 10:27 AM Page 62

Imperial Phoenix: Rescue Aruze Gaming America

his is a new game in Aruze’s G Series of games, which is comprised of simple, volatile video slots in low denominations. The base game is a five-reel, “243-ways-to-win” game—there are no paylines, and wins are registered for adjacent symbols, for 243 possible winning combinations on every spin. The theme centers on the legend of the Phoenix, which marks the beginning of a new era. The main feature is a free-game event with a multiplier feature, triggered either by three gong symbols on consecutive reels (starting with the leftmost reel) or through a random event in which animation of the golden phoenix character randomly appears on the game screen during any bought game. The free-spin feature awards 10 free games. Before the games begin, a randomly determined multiplier appears,

and is applied to the pays in all picture-symbol combinations. The pay table on the screen changes automatically to reflect the multiplier on those symbols. Triggering symbols landing on a free spin retriggers the feature. A distinct feature of this game are the three graphs displaying certain game results. Players can try to predict when the next feature may be triggered based on the data presented in the graphs. Manufacturer: Aruze Gaming America Platform: G Series Format: Five-reel, 243-ways-to-win video slot Denomination: .01 Max Bet: 150, 300 Top Award: 10,000 credits times line bet Hit Frequency: Approximately 50% Theoretical Hold: 2.11%-12.71%

Player’s World Diamond Edition Aristocrat Technologies

his is the first game in Aristocrat’s new “M*Series,” a line of multi-game, multi-denomination video slots each including a menu of six popular Aristocrat titles. M*Series games are engineered specifically for core and jackpot players, according to the company. Each game in the M*Series menu is a proven, popular title using the original math models. Each game also features a multi-level stand-alone progressive jackpot, and each game is player-selectable, multi-denomination. In addition to Player’s World Diamond, Aristocrat ire releasing two other themes to house the sixgame menu—Player’s World Sapphire and Gold Star. Player’s World Diamond Edition features player favorites 5 Dragons Diamond Edition, Lucky 88 Diamond Edition, Buffalo Deluxe, Big Red, Dollar Bear and Super Bucks IV. Player’s World Sapphire Edition features 5 Dragons Sapphire Edition, 50 Dragons Deluxe, Timber Wolf Deluxe, Fortune King Deluxe Sapphire Edition, Big Red Deluxe and Black Panther. Gold Star Multigame features E*Series hits Sky Rider-Golden Amulet, Sky Rider-Silver Treasures, Moon Maiden-Mona, Mood Maiden-Selene, Magic

Global Gaming Business MARCH 2016

Flower-Secret of the Golden Flower and Magic Flower-Seduction of White Peony. Jackpot startups are $8,880 for the Grand, $1,000 for the Major and $100 for the Minor. Manufacturer: Aristocrat Technologies Platform: M*Series Format: Six-game menu, five-reel, multi-line video slots Denomination: .01-$100 (Player-Selectable) Max Bet: Various Top Award: Progressive; $8,880 reset Hit Frequency: Various Theoretical Hold: Various

SAVE THE DATE. You’re changing the game at this year’s G2E. Take the next step and build on your success.

ATTEND G2E 2016.

SEPTEMBER 27-29, 2016 SANDS EXPO CENTER LAS VEGAS

EXHIBITS

SEMINARS

SEPTEMBER 27-29, 2016

SEPTEMBER 26-29, 2016

PRESENTED BY

INCLUDING

T H E WO R L D ’ S L A R G E S T G AT H E R I N G O F G A M I N G P R O F E S S I O N A L S – G LO B A LG A M I N G E X P O.CO M

p. 64 bingo:Layout 1 2/16/16 10:28 AM Page 64

THE BUSINESS OF

BINGO It’s not your grandmother’s game anymore—unless you want it to be BY DAVE BONTEMPO

ingo packs a unique correlation to gaming. It links eras. Unlike its casino-floor counterparts, like craps tables and slot machines, this centuries-old game recruits patrons during their adolescence. Bingo was designed for the pace of leisure, the cause of community fundraising and the social interaction of neighbors. Yet now, in the high-tech, highadrenaline gambling world, bingo connects kitchen parlors and charity halls to the gaming floor and some lucrative jackpots. The balls come faster, at slot-machine speed. Cards have an infinite supply. There is no problem keeping up, because a tablet or machine can accomplish that for a player. Convenience comes with higher stakes and buy-ins. Bingo is a both a niche and an revenue stream for casinos. Throw highroller parties, for bingo players. Target them for hotel specials, restaurants and shows. Invite them to the property. Make them part of the gambling world. However casinos bend, shape, expand or contract this game, bingo spells victory. B—Business: Commercial games offered in Nevada and throughout many Native American jurisdictions offer substantial jackpots. In some cases, a series of properties can be linked to one payout. Casinos offer full-fledged weekend bingo tournaments. I—Innovation: One can now find it on tablets or on casino floors. The speed of play can resemble that of a slot machine. It can also be intertwined with lotteries. N—Natural Fit: It goes with any environment. Dress it up with lights, music and dancing. Dress it down with traditional daubing, cards and number-calling. It can entail social chatter or an adrenaline rush. G—Grandiose: Major properties celebrate it. Foxwoods has a bingo facility offering 3,600 seats. The Potawatomi Tribe in Milwaukee actually ran a bingo casino for nearly a quarter century before adopting additional forms of gambling. Its bingo hall measures 45,800 square feet, which can accommodate around 2,500 players. O—Online: Online for social gamers. On property for casinos wishing to lure foot traffic. On the balance sheet, as a revenue triumph. The celebrated game does not require a particular type of player, or marketing strategy. Bingo’s realm is unto itself a rare wild card for an industry hard-pressed to find an edge. 64

Global Gaming Business MARCH 2016

Video King “Champ”ions the Cause Video King, based in Omaha, Nebraska, enjoys a multi-faceted advance. While bingo game content will always be important, it has found a niche where the action transpires. The company’s newest Android gaming tablet, CHAMP-e, and a powering device, CHARGE-e, have hit the market. CHAMP-e will be deployed at Foxwoods in April or May, and more installs of both items are expected this

p. 64 bingo:Layout 1 2/16/16 10:28 AM Page 65

year. CEO Tim Stuart savors his company’s relationship of nearly 20 years with the prestigious property. “This is wonderful for us,” Stuart says. “It’s the largest bingo room in the world as far as I know, and is one of the best addresses in the world. We are pretty blessed to have a great relationship with the people there.” Video King is already among the world’s largest providers of electronic gaming systems, game designs, digital signage and bingo equipment. Its entertainment systems can be found aboard luxury cruise liners, throughout Indian Country and in thousands of charitable, commercial and military establishments around the world. This is an interesting age of innovation. CHAMP-e exceeds the general tablet capability of allowing gamblers to play an interactive role in games via touch screen. It offers more enhanced, high-resolution graphics—this portable, touch-screen device will include several animations featuring e-cartoon “Champ” in several poses. The tablet features a brighter, 1,280-by-800-pixel screen, greater processing power for more complex patterns and multi-hour run time, packaged in a futuristic, lightweight design, Stuart says.

PokerNanza is basically 52-card bingo. The symbols from the cards turn into poker, essentially turning one game into another. Lovers of kitchen games may recall a similar concept, 5-in-1, by which a blackjack hand turns into poker, then bingo along the way. And the champ needs amps. CHARGE-e will be used to power the CHAMP-e, using wireless technology, with possible applications beyond the gaming industry. This new charging system is foolproof, theft-proof and easy to service, Stuart says. The charge rack has a sliding door that can be key-locked to ensure tablets can’t be removed, further enhancing security. Capable of holding 10 tablets per rack, its new power supply and mechanical workings are all serviceable from the front, enhancing maintenance ease. Using less power than before, the CHARGE-e also has a 2:1 charge ratio, meaning for every hour of charge, operators will get two hours of run time. From the game side comes PokerNanza. It is basically 52-card bingo. The symbols from the cards turn into poker, essentially turning one game into another. Lovers of kitchen games may recall a similar concept, 5-in-1, by which a blackjack hand turns into poker, then bingo along the way.

NOW AVAILABLE

FEATURING

Crazy Money® Deluxe™ features non-stop excitement with rewarding line wins & the chance to spin the massive SkyWheel™ to win instant credit awards, entry into the Money Catch™ Bonus or one of the four progressive jackpots! GIVE THE INFINITY® SKYBOX™ A SPIN AT NIGA 2016 - BOOTH 1459

incredible TECHNOLOGIES

p. 64 bingo:Layout 1 2/16/16 10:28 AM Page 66

OrtiZone can transform any space into a profitable gaming area

Stuart says PokerNanza should be deployed in several Indian casinos over the next several months. It may also become the catalyst for Video King to enter the Nevada jurisdiction this year. While market conditions and state regulations make installation predictions hard to predict, the underlying popularity of bingo remains strong, Stuart asserts. “There is something in it for everybody,” he says. “Bingo players in Indian Country are slot players. They are table-game players, too. You have places in which people are quietly playing bingo and other locations in which there are crazy rooms behind the walls for people playing. You have electronic dance music. “I know there are some age groups, say the twentysomethings who bypassed slots, who think bingo may be boring. Well, it’s so corny, it’s cool.” So cool, in fact, that Video King has invested heavily in research and development for the next five years.

Ortiz: In the Zone Maurilio Silva, president of Ortiz Gaming, believes bingo has spread its customer wings. The company has offices in Europe, North America, Asia and Latin America. “In the past, bingo players were stereotyped as your grandmother, and bingo was all she played,” he contends. “The recent popularity of the game and market research tell us the exact opposite. Bingo is a multi-demographic game, and it goes back to the universal aspects of the game. Bingo has a long

history around the world with people of all ages, and it’s a simple game to get excited about. As a result, bingo players can be gamblers, they can be social gamers, and they can be niche. “Everyone has enjoyed some form of bingo in their life, making it truly a universal game. Recently, social gaming, new trendy bingo halls and millennials have rejuvenated this niche market, making bingo a popular gaming option.” Silva said his company has piled recent success in North America atop its perennial presence in Latin America, Asia and Europe. Over the past year, bingo has become trendier, with fun bonus versions of the game, he contends. He says Ortiz will continue to spend significant portions of its profits to provide updates, fun features and new game designs. One of Ortiz’s most recent rollouts is the OrtiZone, part of its interactive content. “It is a turn-key gaming lounge solution,” he says. “Transform any space into a profitable gaming area, customized to your needs. Start with an OrtiZone server-based environment featuring amazing games like Six Bingo and Triple Bonus. Decorate your space as a lounge setting or use

p. 64 bingo:Layout 1 2/16/16 10:28 AM Page 67

one of our sleek and ergonomic cabinet gaming sets, like O-Evolution. Connect with your choice of device.” Silva says operators are encouraged to revamp any space into a profitable gaming area. This gives the operational edge to the casino by fitting its unique needs, he contends. Operators are not limited to the slot floor. They can update a restaurant, bar or lounge area, create a more relaxed high-limit room, or even offer a wireless feature to their existing slot floor. And what makes a good game these days? “Fun,” Silva proclaims. “It is our belief that this is what all players want. We add to the fun with great graphics, crisp sound quality, and HD screens and devices to allow the player to feel the excitement of the games. “Some players enjoy the bells and whistles of games like Ace Mania, which has a joker that lets you pick your next bingo ball, or Triple Bonus, which has three times the bonuses, while others enjoy a simple bingo game. We offer games across the spectrum, but continue to develop based on what the market is telling us. “One of the new elements we have been offering is games with up to 20 bingo cards. Players just demanded more cards, and we are giving it to them.”

Zitro: Big Bang Sometimes it’s not the game, but the bonus which inspires a “big” idea. For Madrid-based Zitro, which opened a United States branch in Las

Vegas about three years ago, Big Bang is not a wildly popular television comedy. It’s a fundamental player philosophy, embedded in software. Bet more, play more, win more. Big Bang is scheduled for spring 2016 delivery, according to Sam Basile, president of Zitro USA. “You hit the Big Bang button and you qualify to go after bigger bonuses,” Basile says. That sounds like the blueprint to attract a hardened casino player. In the right context, it works for bingo, Basile maintains. “Bingo is still making slow and steady gains in the gaming industry,” he says. “Whether it’s on a casino floor or in the bingo hall, it is a mainstay. We find that it still has the same demographic as slot players—it is still the 40- to 70-year-old female predominantly playing it.” Bingo can address the concept of bigger action, especially if it can be linked to a casino game. But how does a company market to that player? “Some will continue to prefer the paper and the daubers,” says Basile, “but our appeal for bingo on the casino floor is the slot player. We put our machines near a bingo room, and once the players come out, we hope they want to try our version of bingo. It has a different look and feel. We don’t have a five-by-five card. There is no daubing. It’s just a push-and-pray style of game.” But don’t generalize everyone by age group, he adds. “Granny has an iPad too,” he laughs.

p. 68 frankly:Layout 1 2/16/16 11:06 AM Page 68

FRANKLY SPEAKING by Frank Legato

Porn, Poker and Parking

VICT OR R INALD O

ust in from the thought-you’d-heard-it-all department: The world’s most-viewed pornography site, Pornhub.com, has launched an online casino. It’s got real-life porn stars in lingerie dealing these live-action games from some studio in Costa Rica to Pornhub online casinos around the globe. They all have live chat boxes on the screen, and they chit-chat, bob and weave and pose and deal the cards and push the dice and whatever else they do. I don’t know, because I’m not a Pornhub enthusiast. I’m sure it’s a positively boffo porn site, though, because it says here that Pornhub.com is the 67th most viewed website in the world, with more viewers than Amazon.co.uk, ESPN and CNN. (Humans, evidently, are a depraved lot.) I am, though, familiar with the online gaming publication in which I found this news nugget, CalvinAyre.com. Calvin Ayre is the Canadian billionaire who got his billions because he founded Bodog.com and became an online gaming pioneer. He is known for philanthropy, and for hosting parties with bikini-clad models in Costa Rica (there’s that country again) and points south. After he cashed out Bodog, one of the things Ayre did was establish CalvinAyre.com as a not-for-profit internet gambling news website. The site advertises “Gambling News With an Edge”—it not only reports extensively on online gaming; it brings us stories like that one a couple of months ago where a dead poker player’s wake consisted of his friends dressing him in his favorite Yankees sweatshirt, cap and sunglasses and propping him up, all embalmed and hip, at a poker table with chips, cards and all his buddies, for some very creepy pictures. (I think I was at that game. I thought the guy was bluffing.) And now, CalvinAyre.com brings us this story about the new Pornhub casino with the cheeky headline, “Pornhub Launch Online Casino; Takes Live Dealer Action to an All-New Level.” According to the report, porn stars Monique Alexander and Dani Daniels worked “a few shifts to get the site off the ground,” and there is a “Strip Poker” game you can only get into if you have a webcam. Gadzooks. According to CalvinAyre.com, “The whole site is decked out in titillating teases, including shots of porn movie action when you win on the slot machines.” OK, being a slot guy (it’s on my business card), I need to know more details here. Do they 68

Global Gaming Business MARCH 2016

have bonus sequences involving mailmen and lonely widows? What sorts of bonus ladders are displayed? How do you translate porn into program math that will ensure the player has sufficient time on device? After all, what could translate into gambling math more effectively than footage of rich women and buff landscapers on dining room tables? The story says some of the croupier/porn stars will give you a little extra peek if you ask them really nice in their chat rooms. Of course, the chat will be beamed out over the internet to billions of people around the world, but what the hey? Just check your shame at the door of Pornhub Casino. Anyway, going forward, we’ll be monitoring the Pornhub Casino as a service to the industry. We’ll screen every game, every card flip, every stick-poke, every flop, all the while watching the dealers closely. So very closely. Hey, it’s a security issue, right? You never know when a dealer is going to try to palm something. (Hey!) Turning to other news, there’s a lot of rage being flung toward MGM Resorts on social media these days because they plan to charge actual money for self-parking on the Las Vegas Strip. There is an outrage among the old-timers, especially, who have seen their $1 shrimp cocktails, $4.99 prime rib and cheap coffee shops disappear. I get their consternation. I remember when you got everything for free, but it wasn’t really free because you dumped twice as much at the tables and slots as you would have paid for a room and food in the first place. That was the business model put in place by our old pals Bugsy Siegel and Gus Greenbaum. Of course, things didn’t work out for either of them, but the plan worked great for many of their successors who were not rubbed out. These days, the Strip casinos are not about gambling; they’re about resort stuff for tourists, with gambling. Tourists generally expect to pay for parking, but it remains to be seen how they react when their last freeparking zone is removed. Heck, I remember when they started charging for parking in Atlantic City. And everything worked out great there, right? Oh, well. We’ll always have Costa Rica.

THE INDUSTRY EVENT FOR

FORWARD-LOOKING CASINO OPERATORS AND SUPPLIERS IN ASIA

NETWORKING, EDUCATION AND BUSINESS INSIGHT. may 17-19, 2016 the venetian macao

come experience g2e asia and get the insight you need to win in the market.

A G2E EVENT

ORGANIZED BY

PRESENTED BY