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GGB Global Gaming Business Magazine
March 2019 • Vol. 18 • No. 3 • $10
NorCal Tribal Casinos Pennsylvania Problem Cashless Casinos Sci Games’ Barry Cottle SPECIAL SECTION: SECURITY & SURVEILLANCE
Solving the Strip
Why the nickel-and-dime culture may come back to haunt Vegas operators
Bird on the Wire How far will the government go in enforcing the DOJ memo? Table Game
Discounts
Do the math before you commit to any program
Pretty Boxes
Why slot cabinets often drive profitability
Association of Gaming Equipment Manufacturers
AGS-EasternDragon-Ad-201903-GGB.indd 1
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CONTENTS
Vol. 18 • No. 3
march
Global Gaming Business Magazine
COLUMNS
40 COVER STORY
Value on the Strip
AGA 12 Jobs, Jobs, Jobs
The problem of disappearing value on the Las Vegas Strip in casino hotel supply, gambling rules and “nickel and dime” measures like resort and parking fees has all but cut out the value-seeking lower-tomiddle range of customers. A bestselling gaming author outlines the potential threats to the market.
Bill Miller
By Jeff Hwang
Fantini’s Finance 14 Panic Via Wire Frank Fantini
Global Gaming Women 30 Invest in Yourself Cassie Stratford
Cover photo courtesy of the Las Vegas News Bureau
Making My Point 54 Be Cool Roger Snow
FEATURES
Securing the Industry
DEPARTMENTS
16 The DOJ and the Wire Act
Our annual World Game Protection expert report on security and surveillance in the gaming industry.
6
The Agenda
8
By the Numbers
44 Guards and Guns
10 5 Questions
An examination of the risks, protections and overall wisdom of arming your security guards.
15 AGEM
The U.S. Department of Justice memo reversing its prior opinion on the 1962 Wire Act’s application to online gaming and sports betting has caused chaos in the industry. By Brendan D. Bussmann
20 The Cabinet Parade
By Alan W. Zajic
48 Chips Down
60 Emerging Leaders With Gaming Arts’ Keith Kruczynski, Aristocrat’s Tonya Roedell, and JACK Entertainment’s Adam Suliman
The industry’s major slot suppliers continue to devote annual R&D to the production of new cabinets. Supplier executives identify the reasons for the surge.
From counterfeiting concerns to basic accounting at the tables, a case for eliminating casino chips.
66 New Game Review
By Frank Legato
By Willy Allison
70 Goods & Services
26 Pennsylvania Proliferates As the Pennsylvania casino market expands with satellite casinos, online gaming, sports betting and truck stop VLTs, some wonder when the market will reach saturation. By Marjorie Preston
32 California Growth Pains Tribal gaming in California continues to grapple with land-in-trust issues and the Carcieri court decision in attempts to expand. By Dave Palermo 4
Global Gaming Business MARCH 2019
56 The Coming of Cashless The industry’s suppliers continue to release technology that points to the coming of a cashless gaming floor. By Dave Bontempo
62 Evaluating Loss Discounts Discounts on player losses as a marketing tool completely ignores the mathematical facts—they are money-losers. By Jim Kilby
68 Frankly Speaking
73 People 74 Casino Communications With Barry Cottle, President and CEO, Scientific Games
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THE AGENDA
Vol. 18 • No. 3 • MARCH 2019
The ‘A’ Word
Roger Gros, Publisher | rgros@ggbmagazine.com twitter: @GlobalGamingBiz Frank Legato, Editor | flegato@ggbmagazine.com twitter: @FranklySpeakn Monica Cooley, Art Director | mcooley@ggbmagazine.com
Roger Gros, Publisher
M
y friends in the esports community use a word when they advise casinos how to get involved in that potentially lucrative business. They say anything you do in that area has to be “authentic” because without authenticity, the possible participants will sniff it out right away and your business will go bust before it even gets started. But how do you know if your planned event, campaign or esports lounge is going to be authentic? Well, of course, you have to hire them to make certain. OK, that’s a little callous. Authenticity is a slippery concept. Does it include social media and the participation of the social movers? Does it mean your website must contain all the latest bells and whistles? Is it just an “aura” that exudes an authentic vibe? I guess you won’t know until you try it. But the concept of authenticity doesn’t just start and stop at esports. It should really encompass everything a casino does, from slots to tables, from buffet to gourmet, from Engelbert Humperdinck to Arianna Grande. Let me give you an example from my past experience (and despite the characters in this story, it is not political!). In the mid-1990s when I was working at my previous magazine, we decided to put Donald Trump on the cover in his capacity as owner of three Atlantic City casinos. This wasn’t unusual. In the 10 years of his involvement in Atlantic City, I believe he was on the cover of our magazine a halfdozen times and I interviewed him at least twice a year. So I traveled from Atlantic City to New York City to meet with him in his office at Trump Tower (yes, the same one as on The Apprentice). At this time, Trump wanted to re-brand Trump’s Castle, the property in the Marina district of Atlantic City (today it is the Golden Nugget). As I sat down, Trump and his casino guy, Nick Ribis, asked me if I had ever stayed at the Hard Rock in Las Vegas (this was the only Hard Rock casino at the time, long before the company was bought by the Seminoles). As it happened, the Hard Rock was my go-to property in Vegas, mostly because it was easy to park and get to my room without walking five miles like you would in most Strip properties.
6
Global Gaming Business MARCH 2019
So Trump and Ribis started peppering me with questions about the property. Apparently, they had been approached by Hard Rock to rebrand the Castle as a Hard Rock. (And I guess it’s kind of ironic that the former Trump Taj Mahal is now the Hard Rock Atlantic City, but I digress.) So I explained the ambiance and “hipness” of Hard Rock, how the public space was imbued in rock history, and how the rooms were very modern and clean. And I tried to explain about the “cool” employees, who were very casual with the guests. But they didn’t get it when I related a story that the Hard Rock GM at the time, Gary Selesner (now Caesars Palace president), told me about the culture. “All I have to worry about is how many piercings they have visible,” he said. Selesner’s intent was to explain how Hard Rock allowed employees more latitude when serving guests, but Trump and Ribis didn’t really get it. So eventually there was no deal with Hard Rock, but Trump apparently liked the rock ‘n’ roll theme, so when Trump Marina became the rebrand, it came complete with guitars on the wall and rock memorabilia scattered throughout the property—but with none of the ambiance or the hipness of the Hard Rock casino. And of course it failed. In a few years, the guitars came down and Trump Marina became simply a Trump-on-the-water disappointment. The lesson is that Trump Marina was far less than authentic. Hard Rock has a lock on that when it comes to rock ‘n’ roll. Those of us who grew up during the rock era knew immediately that Trump Marina didn’t get it. It felt fake. It felt forced. There really is no handbook to explain what is authentic and what isn’t. Authenticity comes when your event, campaign or location is designed with the knowledge and experience of what you are trying to create. If that means hiring consultants to assist with that, do it. If you have people on your staff with the passion for the theme, maybe that’s all you need. But for me, whether I’m familiar with the subject or not, it’s the reaction of your intended audience that will tell you instantly if you are truly authentic.
Lauren Byrge, Director, Sales & Marketing LaurenB@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 twitter: @LisaJohnsonPR Columnists Frank Fantini | Bill Miller Roger Snow | Cassie Stratford Contributing Editors Willy Allison | Dave Bontempo twitter: @bontempomedia Brendan D. Bussmann | Jeff Hwang | Jim Kilby Dave Palermo twitter: @DavePalermo4 Marjorie Preston | William Sokolic Michael Soll | Alan W. Zajic
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 twitter: @CDCNewswire
• Dean Macomber, President, Macomber International, Inc.
• Stephen Martino, Vice President & Chief Compliance Officer, MGM Resorts International, twitter: @stephenmartino
• Jim Rafferty, President, Rafferty & Associates
• Thomas Reilly, Vice President Systems Sales, Scientific Games
• Steven M. Rittvo, Chairman Emeritus, The Innovation Group twitter: @InnovGrp
• Katherine Spilde, Executive Director, Sycuan Gaming Institute, San Diego State University, twitter: @kspilde
• Ernie Stevens, Jr., Chairman, National Indian Gaming Association twitter: @NIGA1985
• 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 2018 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
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BY THE
NUMBERS
Skillfully DOne T
he advent of skill games in the casino business has been at best uneven. The biggest problems faced by slot companies offering skill games have been questions about who plays skill games and how much revenue they make. Last month, skill game company Synergy Blue produced a report, “The State Of Skill-Based Games In A New Era Of Gambling.” The report, a survey of more than 100 casino operators, addresses the advantages and challenges of skill games. At right, the report reveals that more operators would add skill games to their mix if increased revenue could be achieved. And while some operators measure the results of skill games against the floor average, others believe that skill games are a niche product unto themselves. To download a copy of the report, visit synergyblue.us.
Crossing Over
l
egal sports betting in the U.S. outside of Nevada has been conducted since June of last year. While that’s not a long time, sports betting supplier Kambi has come out with a report on how sports betting was conducted during the recently concluded NFL season and focused on betting patterns during the season. The report says that more than twothirds of the sports betting handle came from the four major U.S. sports: the NFL, the NBA, college football and Major League Baseball, with almost half of U.S. players making their first bets on the NFL. In fact, nine out of 10 U.S. players made at least one bet on the NFL during the season. As the chart at right shows, players who bet all four major sports account for 54 percent of the overall handle. And while a quarter of the bettors played only the NFL, they accounted for only 4 percent of the overall handle. To obtain a copy of the report, visit Kambi.com. 8
Global Gaming Business MARCH 2019
The Value of Cross-sell
Only 18% of bettors bet on all major U.S. leagues and produce 54% of handle, but one quarter of U.S. bettors back NFL and no other big league.
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NUTSHELL
“They
5QuestioNs
Nehme Abouzeid President, LaunchVegas
N
ehme Abouzeid is president and founder of LaunchVegas, a consulting firm dedicated to brands looking to launch big in Las Vegas and other destination markets. Prior to forming LaunchVegas, Abouzeid worked in various senior capacities at Las Vegas Sands, Wynn Resorts and the NHL’s Vegas Golden Knights. He spoke with GGB Publisher Roger Gros in Las Vegas in January. To hear a full podcast of this interview, visit GGBMagazine.com. GGB: You started your career as a journalist, worked for such major companies like Las Vegas Sands and Wynn Resorts, and then, of course, you were the first marketing VP for the Vegas Golden Knights. What did you learn at each of those steps, that allowed you to make the next step? Nehme Abouzeid: Going to journalism school and my experience of five years as a journalist really
1 2 3 4 5
helped me become a quick study at everything—ask the right questions, learn how to flesh out a subject. So I think journalists are underappreciated, especially in their ability to tell a story and relate very complex subjects in simple ways. And then going into an industry like gaming, that has many lines of business under one roof, all of which could be independent companies on their own, and doing $20 billion in development I helped work on at Wynn and Las Vegas Sands, it really guided me well. What is it that makes Las Vegas so special, and why do you call it your home?
I didn’t expect to be here, to be honest. I was a Boston guy, went to college in D.C., lived in the Middle East and Los Angeles when I was a journalist, and Vegas was the last place I’d expect to be. But it’s going on 15 years now, and I believe the quality of life here is sort of that best-kept secret, nationally. I’m also invigorated by Las Vegas’ constant reinvention. When you think about it, with 400 casinos in 40 states, we all could be looking at the Strip and they could be rusting hulks of steel. I’m proud of Nevada, I’m proud of Las Vegas, because we all roll in the same direction, when a project is good for the economy. The next reinvention of Las Vegas will start in 2020, with several new projects slated to open. How can people prepare for that change that’s coming up?
If you’re talking about locals, you know, Vegas always had this real unique dynamic, where 2 million locals are spread out, and 43 million tourists are highly concentrated. We have 200,000-plus people working in gaming and hospitality, so it’s a really interesting dynamic. But it’s not your typical market. It’s not like L.A., it’s not like Chicago, it’s not like New York; it’s quite different.
Said It”
“The bridge is a game-changer. The bridge makes it easier for people to get over and back over time. It runs all night. You don’t have to worry about a boat.” —Rob Goldstein, president and COO, Las Vegas Sands Corp., on the positive impact on Macau casinos of the new Hong KongZhuhai-Macau Bridge
CALENDAR March 3-6: World Game Protection Conference, Tropicana Las Vegas. Produced by World Game Protection, Inc. For more information, visit WorldGameProtection.com. March 6-7: GLI North American Regulators Roundtable, Luxor Las Vegas. Produced by Gaming Laboratories International. For information and registration, visit gaminglabs.com. March 18-21: Management of Table Games, Reno, Nevada. Produced by the University of Nevada, Reno Gaming Management Program. For more information, visit bit.ly/TableGames19. March 21: UNLV Gaming & Hospitality Education Series: Operators vs. Manufacturers— Making Peace, Stan Fulton Building, University of Nevada, Las Vegas. Produced by GGB Magazine & UNLV William F. Harrah College of Hospitality. For more information, visit UNLVGHES.com. March 25-27: Western Leadership Development Conference, Las Vegas. Produced by Global Gaming Women. For more information, visit globalgamingwomen.org. April 1-4: Indian Gaming 2019, San Diego Convention Center. Produced by the National Indian Gaming Association. For more information, visit IndianGaming.org/events.
How does your company LaunchVegas participate in this next phase of Vegas?
I’ve been doing this 15 years, helping big brands with big development projects launch and scale—especially with the $500 million hockey team. I personally had spreadsheets that I was cataloging for years, of how to launch a project with a critical path, how to do it right, how to launch and scale. So, I realized I kind of have this Vegas playbook, and I could give this expertise to companies that wanted to come in and enter the market the right way. So, that’s really what I focused on, and I called it LaunchVegas because really I wanted to focus on early-stage, yet big projects. Right now, I’ve got clients in the sports betting, tech and the health care spaces. So we’re really not just limited to casinos. Why did the Golden Knights work so well for Las Vegas?
Tourists wanted to follow their team—that was obvious. But when Las Vegas locals want to brag about how good their seats are, how much merchandise they own, it really came together, and credit to Mr. Bill Foley for pushing the idea, and the Maloofs for having the vision, and then hiring the right people to make it happen. I remember, I joined the team on November 7, 2016. We unveiled the logo and name November 22. And at that time, (NHL Commissioner) Gary Bettman said, “I’ve never seen that many people come out, just for a name and a logo unveil.”
10
Global Gaming Business MARCH 2019
April 22-25: Betting on Sports America 2019, Meadowlands Exposition Center, Secaucus, New Jersey. Produced by SBC Events. For more information, visit sbcevents.com/betting-onsports-america-2019. April 23: UNLV Gaming & Hospitality Education Series: Table Games & ETGs—Setting the Bar, UNLV’s Stan Fulton Building, Las Vegas. Produced by GGB Magazine & UNLV William F. Harrah College of Hospitality. For more information, visit UNLVGHES.com. April 23-25: Southern Leadership Development Conference, Seminole Hard Rock, Hollywood, Florida. Produced by Global Gaming Women. For more information, visit globalgamingwomen.org.
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AMERICAN GAMING ASSOCIATION
Jobs, Jobs, Jobs
The American gaming industry is more diverse and creates more employment opportunities for a wider variety of people than most other industries. By Bill Miller
T You want a better return? You want RPM. Because nobody knows the gaming business better than we do. Your games, your players, your rewards programs, we do it all. So call or email us at info@rpmadv.com.
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we speak casino
12
Global Gaming Business MARCH 2019
o say I’ve begun my tenure as the CEO of the American Gaming Association at an exciting time for the industry would be an understatement. The Department of Justice issued its reinterpretation of the Wire Act on my first day, seven states introduced sports betting legislation in the final two weeks of January and the Bureau of Labor Statistics upheld gaming as the economic driver we know it to be in its monthly jobs report. I’m proud to work in this industry with the 1.8 million Americans whose jobs are supported by it. As you likely know, the Bureau of Labor Statistics highlights industries that exemplify key economic growth. By focusing on gaming, BLS reported that gaming had the second-highest growth of any sector in January, adding 32,000 jobs and outpacing both manufacturing and professional and business services. Gaming companies across the country are hiring rapidly to meet increasing demand by American consumers who, now more than ever, are engaging in the many mainstream entertainment offerings our members provide. Gaming offers a wealth of career opportunities for workers from all backgrounds with a wide array of skill sets. Over the next decade, the gaming industry is expected to add tens of thousands more jobs that support the working class and provide a pathway to the middle class, not just in Nevada and New Jersey, but across the country. With operators and suppliers in 42 states, few industries employ as diverse a workforce as gaming, with workers in more than 200 job classifications, including hightech, engineering, software development and law enforcement.
President and CEO American Gaming Association Almost 40 percent of gaming’s workforce is composed of racial or ethnic minority employees—11 percent more than the U.S. population. Within gaming’s diverse workforce, 75 percent of minority employees—and 71 percent of all gaming industry employees—say that the industry provides opportunities for advancement for workers at all levels.
This is a “ remarkable time
for gaming in America. The industry continues to grow, and acceptance of gaming as a form of mainstream entertainment has never been higher.
”
This is a remarkable time for gaming in America. The industry continues to grow, and acceptance of gaming as a form of mainstream entertainment has never been higher. The January jobs report showing our industry’s remarkable progress is another reminder of the integral role gaming plays in communities across the country, providing rewarding careers and enabling small business success.
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FANTINI’S FINANCE
Panic Via Wire DOJ memo reversal is just another sign that government is part of the problem, not the solution
W
ith the exception of Nevada, investments in gaming companies carry one overriding risk—the government. That point was brought home when the U.S. Department of Justice threw a wrench into the proliferation of online gaming by reversing course and saying the 1961 Wire Act bars all interstate gambling on the internet, not just sports betting. Stocks sold off in the wake of the opinion, and its impact remains unclear weeks later. Some see a big negative impact, noting that information and financial transactions related to sports betting and online gaming that move across state lines might be considered illegal even though wagering is intrastate. Others think the interpretation might not apply to non-wagering information, such as servers in one state supporting operations in another state. In that case, they see the status quo remaining. Yet others note that a growing number of congressional members represent states that now have sports betting, intend to legalize sports betting or operate online lotteries. Those states combine to a significant lobby to defend the interests of online gaming. Regardless of how it plays out, the DOJ opinion is just the latest instance of a national government throwing a monkey wrench into the gaming works. The United Kingdom has slammed bookmakers by slashing the maximum bet on gaming machines in betting shops from £100 to £2, which will lead to significantly lower earnings for companies like William Hill. And Britain might not be done as the UK Gaming Commission heads into a review of the industry and there is growing pressure to rein in sports advertising. Or take Italy. Higher taxes and a mandatory reduction in amusement-with-prize machines have hit some stocks hard, such as IGT. Or consider China and Macau. There are varying degrees of apprehension over the re-
14
Global Gaming Business MARCH 2019
By Frank Fantini
newal of the six Macau gaming concessions and whether the government will put the licenses out to bid to other operators. And there are always questions about how the national Chinese government might interfere for any number of reasons, including a tit-for-tat punishment of the three U.S. concession holders as part of the trade conflict with the United States. Meanwhile, concession holders keep investing billions of dollars in Macau to keep to the promise of redeveloping the city into a tourism mecca, not just a gambling town, hoping to appease the government, excited about the still great untapped potential of the mainland China market, and with fingers discretely crossed that concessions will be renewed under terms similar to today’s. Back in the U.S., the situation has improved in many state capitals. Instead of overly strict rules slapped on suspicious newcomers as was the case when casinos were first legalized, legislators now more often are trying to help protect companies that have become established employers and big taxpayers. Louisiana, as an example, is comprehensively reviewing its gaming industry with an eye towards making it more competitive. But threats still exist, such as Illinois lawmakers perhaps approving expansion that could oversaturate their markets, or states legalizing slot routes, creating convenience gambling competition to casinos. The bottom line is that gaming companies have many attractive qualities as investments, but they might never enjoy the same valuations as other industries because of legislative risk.
FINDING ELDORADO Eldorado Resorts continues to evolve at a rapid pace. The latest event in Eldorado’s transformation was closing on the agreement with British bookmaker William Hill in which Eldorado now owns 20 percent of William Hill US and 13.4 million shares of London-listed parent William Hill Plc.
Under the agreement, William Hill will place its sports books in all current and future Eldorado casinos. The agreement also makes Eldorado international, with William Hill US having operations in St. Kitts and the Bahamas, and Eldorado’s stake in William Hill Plc. giving it financial interests in the United Kingdom. The agreement follows another with the Stars Group, the international online gaming, poker and sports betting company, that will operate skins in Eldorado’s markets in exchange for a revenue share, $25 million in stock, another possible $5 million of stock, and perhaps more equity later. At present, the dollar figures are relatively small. In 2017, the operating profit for William Hill US was $28.5 million, making Eldorado’s share $5.7 million. The 1.6 percent stake in parent William Hill Plc. represents about $32 million in stock value as of this writing. That compares to Eldorado’s market cap around $3.5 billion. Likewise, Eldorado’s $25 million stake in the Stars Group is just a sliver of that company’s $4.8 billion market cap. Business agreements, of course, are made for what will happen, not what has happened. And the potential from this agreement for Eldorado appears significant given that sports betting in the U.S. is in its infancy. Just over four years ago, Eldorado was a small private company owning namesake Eldorado Casino in downtown Reno, half of adjacent Silver Legacy and a riverboat casino in Shreveport, Louisiana. Then came the acquisitions: MTR Gaming, through which Eldorado became a public company, adjacent 1.5 casinos in Reno from MGM, Isle of Capri, Tropicana Entertainment and Grand Victoria. Today, Eldorado operates 27 casinos in 13 states and serves such major markets as Chicago, Dallas, Houston, St. Louis and Philadelphia. Frank Fantini is the editor and publisher of Fantini’s Gaming Report. For a free 30-day trial subscription email subscriptions@fantiniresearch.com.
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AGEMupdate AGEM MEMBER PROFILE
Since 1991, PDS Gaming has provided innovative financial solutions to the gaming industry. Headquartered in Las Vegas, PDS has deployed nearly $1.3 billion in capital to a roster of over 300 customers and clients. This roster covers much of the gaming industry’s landscape, including its largest operators, OEMs and distributors, and industry entrepreneurs. The company’s reach is global, operating in all major U.S. jurisdictions, including Native American, state lotteries, Class II and Class III markets, as well as cruise ships, and in international markets. At its core, PDS offers steady, quick and efficient access to capital in many forms, at attractive rates and with flexible terms. The acquisition of PDS in 2017 by a large investment management firm provides PDS’ clients with an even greater access to capital. Similarly, the addition of a new management team in 2018 has allowed PDS to evolve to further address the industry’s needs in an ever-changing global financial marketplace. PDS is now an established gateway for industry partners looking to finance growth in an efficient, affordable, one-stop process. Recently appointed CEO Alex Dungan added industry veterans Daniel Davila and Melissa Sweitzer to bolster an already strong sales team that included Simon Burgess and Dean Berndt. PDS veterans Peter Cleary and Gina Garner-Ball were named president/COO and CFO, respectively, to support those efforts. Among the many customized financial solutions PDS offers are: • Equipment leasing, featuring lower monthly payments and multiple end-of-term options • Project and corporate financing • Financing programs for operators and OEMs alike seeking more flexibility and less risk, such as OEM white label and sale leaseback programs for operators, both offering terms up to five years • Growth capital, for inventory production and R&D financing • Short- and longer-term receivables purchases • Financing of new casino amenities and expansions For more information on how PDS’ financial solutions can help grow the top line, contact PDS at 800-479-3612 or info@pdsgaming.com. Visit the website at pdsgaming.com.
AGEM Board of Directors Actions – February 2019 • In an unexpected move, Nevada Governor Steve Sisolak named Sandra Morgan as the chairwoman of the Nevada Gaming Control Board, replacing Becky Harris, who had been in the role for just a year. AGEM enjoyed a very good working relationship with Chairwoman Harris during her tenure, and it is hoped this relationship continues with the new chairwoman. • AGEM is in consultation with the Washington State Gambling Commission (WSGC) regarding changes to the current regulations that prohibit slot machine or table gaming companies to show games or new innovations that don’t have lab approval at the annual Washington Indian Gaming Associationorganized trade show. AGEM submitted its position that trade shows and events provide the correct environment to showcase the latest games and technology. The WSGC is open to making changes and has released a first draft, which is currently being reviewed. AGEM will feed back any suggested changes by early March in time for the next commission meeting. • AGEM continues with its Nevada workforce development effort to lower the age of gaming supplier employment and internships from 21 to 18 to widen the opportunities of a growing talent pool. The Nevada legislature opened its session February 4, and will take up the bill in due course. • AGEM members approved a series of contributions to important industry events at the recent monthly board meeting. The Washington Indian Gaming Association’s Northwest Indian Gaming Conference and Expo will receive $10,000 for the Tuesday night celebration reception during the forthcoming 20th anniversary event being held June 17-19; The Southern Gaming Summit in Mississippi May 7-9 will receive sponsorship of $5,000; Japan Gaming Congress held in Tokyo May 10-11 receives £8,000 in sponsor ship; and once again, AGEM will be the sole sponsor of the prestigious G2E Asia President’s Reception with a contribution of $25,000. • AGEM membership has risen to an all-time high of 172 as five new companies were voted in. Eclipse Gaming became Bronze members. Based in Duluth, Georgia, the company is a developer of top-performing games and innovative solutions. New Associate members include Acuris Risk Intelligence, based in London, an independent provider of data intelligence for anti-money laundering, anti-corruption and cyber security professionals; Fennemore Craig, a law firm with offices in Arizona, Nevada and Colorado; Global Gaming Guidance Group (G4), based in Amsterdam, which aims to minimize the impact of problem gambling by promoting a worldwide accreditation program for operators and suppliers; and NRT Technology, based in Toronto, a global technology leader in the design and development of nextgeneration enterprise payment systems.
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The AGEM Index increased in January 2019 by 61.07 points to 463.58 points, a 15.2 percent gain from December 2018. The AGEM Index’s January 2019 growth was due in large part to a 12.77 percent increase in the stock price of Aristocrat Leisure Limited (ASX: ALL), which grew from AU$21.84 to AU$24.63. This stock for 24.57 points of the AGEM Index’s January growth. Scientific Games Corporation was responsible (SGMS) experienced a 40.16 percent gain from $17.88 to $25.06, which in turn led to a contribution of 12.12 points. Overall, companies in stock price dur most AGEM Index reported strong results performance with 12 trending and two moving negatively. The monthly performance ing the month, positively of the AGEM Index was reflected in the major stock indices, as the Dow Jones Industrial Average and the S&P 500 experienced while the increases of 7.2 percent and 7.9 percent, respectively, NASDAQ grew by 9.7 percent.
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.
MARCH 2019 www.ggbmagazine.com
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Reversing the Reversal:
Creating Wire Act Chaos Will latest DOJ memo put the brakes on iGaming? By Brendan D. Bussmann
L
ate in the afternoon of January 14, 2019, the U.S. Department of Justice (DOJ) released a new memo reversing its stance on the Interstate Wire Act of 1961. This 23-page memo, issued by the DOJ’s Office of the Legal Counsel (OLC) and dated November 2, 2018, stressed that the Wire Act applies to all forms of gaming. The memo reversed an earlier DOJ memo issued in 2011 which stated that the Wire Act only applied to sports betting. The action, which at best can be described as reversing a reversal, raises several concerns for the gaming industry, especially for online gaming that occurs in the states of Nevada, New Jersey and Delaware, in addition to active online gaming startups under way in Pennsylvania. Taken in its strictest form, the decision may also have serious implications for mobile gaming, sports betting, daily fantasy sports (DFS), lottery, and potentially even internet/social media marketing programs. Global Market Advisors (GMA) had predicted for some time that the reversal of the 2011 memo would occur during the Trump administration through the efforts of the Coalition to Stop Internet Gaming (CSIG). The memo, written by Acting Assistant Attorney General Steven Engel, states: 16
Global Gaming Business MARCH 2019
Based upon the plain language of the statute, however, we reach a different result… While the Wire Act is not a model of artful drafting, we conclude that the words of the statute are sufficiently clear and that all but one of its prohibitions sweep beyond sports gambling. We further conclude that the 2006 enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA) did not alter the scope of the Wire Act. The opinion also noted that the previous memo “devoted insufficient attention to the statutory text and applicable canons of construction” of the Wire Act. The memo provides distinct conclusions on how the Wire Act should treat all forms of gaming, but it fails to provide a full analysis for several issues or spell out the implications to the existing market. It only raises further questions on how responsible operators should act in the current environment. On the following day, Deputy Attorney General Rod Rosenstein provided limited guidance on how enforcement may occur subsequent to the initial OLC memo. While not specific, Rosenstein stated:
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As an exercise of discretion, Department of Justice attorneys should refrain from applying Section 1084(a) in criminal or civil actions to persons who engaged in conduct violating the Wire Act in reliance on the 2011 OLC opinion prior to the date of this memorandum, and for 90 days thereafter. A 90-day window will give businesses that relied on the 2011 OLC opinion time to bring their operations into compliance with federal law. This is an internal exercise of prosecutorial discretion; it is not a safe harbor for violations of the Wire Act. At the time of this article, no further guidance has been issued, although rumors still persist that some clarity will be brought to what currently seems to be a murky enforcement posture. The effect of the memo can best be described as creating chaos within the gaming industry. As reported by the Wall Street Journal, the OLC memo was supported in part by memos and arguments made for years through the efforts of lobbyists for the chairman of Las Vegas Sands Corp., chief sponsor of the Coalition to Stop Internet Gaming. While the DOJ continues to insist that it issued the opinion in response to former Attorney General Jeff Sessions’ request to review, many continue to note the ties to the multipronged lobbying and political efforts led by the CSIG. The reversal of a legal interpretation by the DOJ is not unheard of, but it is unusual. The fact that memos and arguments prepared by an outside group may have influenced the drafting and conclusions of a DOJ/OLC memo makes the situation even more unique.
The Wire Act and Recent Notable Actions The United States Congress passed the Wire Act in 1961, specifically forbidding the transmission of sports wagers across state lines. The act was passed as part of a series of anti-racketeering laws, including the Illegal Gambling Business Act, the Interstate Transportation of Wagering Paraphernalia Act, and the Travel Act. It was designed to aid states in enforcing statespecific bookmaking and gambling laws focused on helping the DOJ battle organized crime and trafficking during the Kennedy Administration. Specific language from the Wire Act included a criminal provision: Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both. Significant technological advances have been made since the law was enacted over 50 years ago, allowing state governments to recognize legal versus illegal activities. Many have interpreted language in the Wire Act to prohibit the use of the internet for transmission of sports bets or wagers, along with information assisting in the placement of such bets or wagers, subject to certain exceptions. It is important to note that the internet did not exist in 1961 as it does
today. In addition, the Wire Act itself does not specifically discuss how it may apply to other forms of gambling. As such, the law has been open to interpretation as to whether it prohibits internet gambling. Regardless of differing interpretations, the DOJ and attorneys general from multiple states have deemed the Wire Act as applying broadly and covering all forms of internet gaming, including iLottery. This is in direct conflict to laws passed by New Jersey, Nevada, Delaware, Pennsylvania, New York, Illinois and others.
The 2011 DOJ Opinion Memo In 2011, the DOJ Office of Legal Counsel released an opinion that allowed for online gaming, as it was not restricted under the Wire Act. The opinion was required by New York and Illinois to clarify whether or not they could sell lottery tickets over the internet within their own borders. At the same time, Senators Harry Reid (D-Nevada) and John Kyl (R-Arizona) asked for either the DOJ to take a position on the prohibition of internet gaming or Congress to craft legislation to address online gaming. Because of the opinion, the states of Nevada, New Jersey and Delaware have entered into pacts for online gaming, specifically poker and other casino-style games. Pennsylvania recently passed online gaming, and has over 10 operators that each paid a $10 million license fee and are trying to see what the next steps may be to launch operations. Other states like Michigan continue to push forward efforts to legalize online gaming. In 2017, Sessions said that he would review the 2011 opinion by the Justice Department once he was sworn into office. However, Sessions recused himself on the online gaming issue because of a potential conflict of interest. The conflict arose when Sessions hired attorney Charles Cooper to represent him for congressional investigations relating to the firing of former FBI Director James Comey. Cooper had also been hired by the Coalition to Stop Internet Gambling to lobby on their behalf. This left any review of the 2011 opinion up to the deputy attorney general. Many took the 2011 memo to mean that states could band together to allow gambling across state lines. Opponents of online gaming will contend that Congress needs to clarify what is, and is not, allowed under the Wire Act, especially as it relates to modern-day telecommunications. Those opposed to the current interpretation of the Wire Act continue to push legislation in the Restoration of America’s Wire Act (RAWA), which has been advocated by several members of Congress over the years. As previously proposed, the bill would grant an exemption to online activities like fantasy sports.
The Post-PASPA World Since May 2018, the gaming industry has rejoiced over the judicial repeal of the Professional and Amateur Sports Protection Act (PASPA) because it created an opportunity for sports betting to expand across the United States on a state-by-state basis. The ruling subsequently allowed mobile wagering within the geofenced borders of each state, as had been done in MARCH 2019 www.ggbmagazine.com
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The memo provides distinct conclusions on how the Wire Act should treat all forms of gaming, but it fails to provide a full analysis for several issues or spell out the implications to the existing market. It only raises further questions on how responsible operators should act in the current environment.
Nevada before the Supreme Court ruling. However, some believe that this, too, could be in danger because of the most recent interpretation of the Wire Act. In September 2018, a hearing was held by a subcommittee of the U.S. House of Representatives, where former Nebraska Attorney General Jon Bruning delivered his testimony stating that the U.S. Supreme Court decision on PASPA created an opportunity for criminal organizations and potential exploitation of individuals. Bruning, who represented CSIG, said that Congress needed to act on the issue to provide federal guardrails that would work in conjunction with states to put protections in place while allowing states to earn revenue from legal online sports books and gambling. Through his testimony, he continued to advocate for the Wire Act to be restored, as well as the enforcement of other federal acts, including UIGEA, to combat the illegal market. Bruning highlights this by stating: “Even though the Supreme Court tossed the federal sports betting ban, online sports betting is still illegal. The Wire Act applies to all forms of gambling, and even under DOJ’s current interpretation, the Wire Act applies to sports betting. This means sports books wanting to hedge their risk by establishing a national pool, creating interstate compacts, or laying off bets across state lines—all would do so in violation of the Wire Act.” Bruning compared the emergence of sports betting to the existing marijuana market and the ability to regulate within states that have legalized, as well as neighboring states that do not have it legalized in any form. It should be noted that the current DOJ also issued a memo about one year ago regarding the enforcement of marijuana, which put the legal market of each state into question. It would be complete irony, in the wake of the chaos created by the memo, that some would seek federal legislation that would derail the existing state-by-state gaming setup, which has been in place for decades. Murphy v. NCAA was joined by over 20 states because PASPA overstepped the rights granted to states. Yet, there is one group stepping forward to try to establish guardrails that would take these same states’ rights away.
Potential Impact on the Gaming Industry As the gaming industry reaches this crossroads, there appear to be two initial next steps: either an official court interpretation of the Wire Act as it relates to the modern world, or legislation that would be enacted at the federal level. As legal scholars continue to lean against the most recent interpretation, the latest memo asserts itself as the new “governing view” for the gaming industry. It only continues to bring ambiguity to a process that has allowed states to craft online, mobile and DFS legislation for nearly the last 18
Global Gaming Business MARCH 2019
eight years. The opportunity for federal legislation seems challenging at best for a government that has had difficulty agreeing on a budget, operates off of continuing resolutions, and has been unable to come to terms on important issues like immigration policy. Plain and simple, the federal government should not govern by executive order or interpretation through memoranda. It is time to actually legislate policy and let the courts reach conclusions on the laws that are on the books. While there is federal legislation floating in regard to sports betting, it may also serve as a tool to address any potential revisions to the Wire Act. However, the gaming industry, which has long been divided on online gaming and now even on sports betting, will have to be focused on what this may do to operations in their existing jurisdictions and beyond. As with any piece of legislation, the good comes with the bad, and it may take years to address this issue through legislation or through lawsuits within the judicial system. The gaming industry in the early 2010s was not able to find consensus with Congress on how to enact a federal framework to regulate online gaming. It will be more challenging for that to occur now, not only because of the current political climate but also because of division within the gaming industry. The involvement of other stakeholders, such as professional leagues and the NCAA, also adds several new voices and competing interests to the debate. While some have suggested the implementation of federal guardrails, this may ultimately interfere with state sovereignty over their existing gaming regulations. However, modernizing the existing Wire Act and UIGEA seems the best decision to craft a compromise. There will be differing views as to how this can be done to bring further compliance, and to allow operators to continue to act with integrity as technology continues to advance. There may be several chapters left to write in this ongoing saga of interpretation of the Wire Act, but resolution will come only through education and advocacy on the benefits of modernization, as well as the impact that archaic regulations may have on the modern industry. Bringing the issue out of the shadows while tackling the illegal market should be the first and foremost priority, as opposed to punishing those that have operated diligently and in good faith over the last couple of years. The story is far from over, and the industry needs to push forward a movement to bring clarity to the issue and allow responsible consumers to play online and through mobile apps in a strictly regulated environment. Brendan D. Bussmann is a partner and director of government affairs with Global Market Advisors and can be reached at bdb@globalmarketadvisors.com.
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T U Oof the BOX Why slot manufacturers continue the parade of new slot machine cabinets By Frank Legato
C
onsidering the entire history of the modern slot machine, one of the elements that has changed the least is the cabinet. However, if one were to view only the past five years, cabinets arguably have been the element that has changed the most. Up until recently, the life of a core or premium cabinet was, comparatively, quite long. The Bally S2000 lasted decades, through several owners of what is now Scientific Games Corporation. The Alpha Pro line of cabinets from the same manufacturer, first launched in 2006, survives in some form to this day. Other examples of long-lasting cabinets can be seen from the core video of IGT and Aristocrat to the former Cadillac Jack cabinets inherited by AGS when it acquired that company. Konami Gaming has gone through several cabinet eras, from the Advantage series to Podium to today’s Concerto. These days, though, every major trade show sees most if not all of the major manufacturers introduce new cabinets, or launch new cabinet groups. During the past five years, hardware has become nearly as important as software and game math in distinguishing the products of a given slot manufacturer. Clearly, part of the reason is the rapid evolution of consumer technology, an area in which casino slot manufacturers traditionally have lagged behind, but lately have been closing in to where new consumer technology is rapidly being adopted by casino suppliers. “I think it’s the iPhone effect,” comments Andrew Burke, senior vice president of slot products for supplier AGS. “Everyone has been trained to appreciate hardware. Prior to Apple doing what they did with the iPhone, you had a phone, and that was just a way to call somebody or 20
Global Gaming Business MARCH 2019
text somebody. Apple realized there’s a design on this that’s missing; let’s evolve that. And customers started wanting more. “Gaming cabinets are not dissimilar, in that it used to be that you went to a metal vendor, like a Cole Kepro, and you said hey, what parts do you have on your shelf? What can you get easily? We’ll slap those together and make our own cabinet. Now, we’ve got a team of 12 people in industrial engineering, and we work with a third-party industrial design firm. We spend as much time thinking about the design of the cabinet as we do our games. Probably more.” “It has to do with customer demand,” agrees Steve Walther, senior director of marketing and product management for Konami Gaming. “It was interesting when, maybe 10 or 15 years ago, having a cabinet that would last three to four years as the primary cabinet was something to hang your hat on... But then the market somewhat changed, and the customer base started responding to far more newer and shinier cabinets, and the newer technology. “It’s just aligned itself more with the technological advancements that you see in the non-gaming space— television advancements, video game system advancements, phone advancements; they’re all happening so much faster outside of our sector that by releasing more cabinets with newer technology and newer game styles and products, we’re just keeping up with other forms of entertainment. “We are wholesalers of entertainment. We wholesale entertainment to the retailers, who are our casino customers. So, we have to be in tune with what other wholesalers are doing to maximize the commercial opportunity for our retailers and their customers.”
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The higher the definition in video that is widely viewed on digital TV or even smart phones, the more suppliers are pushed to improve the image on slot machine displays. Technology Race Even if the advancements came from outside the industry, when it comes to hardware, they’ve sparked a healthy competition among gaming suppliers. “Five to seven years ago, there was a big pushback from our operators and customers to quit with the cabinet proliferation, but it didn’t really stick,” says Dallas Orchard, senior vice president and chief product officer for IGT. “Over the last few years—particularly with the growth of suppliers; there are so many suppliers now—one way to really differentiate yourself these days, and make a bit of a splash, is with the cabinets.” “Manufacturers are always searching for the next great must-have hardware,” comments Dean Ehrlich, executive vice president and games business leader for Everi Holdings. “We all know great hardware draws the eyes of players. It’s an area where we have to continue to innovate.” He adds that cabinet changes must be done with value to the player as the main driver. “Building cabinets and utilizing technology for technology’s sake doesn’t make an impression on the player,” he says. “There has to be some level of play element you’re offering the consumer to give the value proposition they didn’t have before. Or else, why do it?” In addition to adding value, IGT’s Orchard says the evolution of the slot cabinet allows suppliers to place their products above the din of competition. “At this past G2E, I would say that every supplier had a pretty impressive hardware offering,” he says. “Even some of the so-called smaller guys had some very, very nice hardware. I just think it helps differentiate you at trade shows and on the casino floor. They’re physical, so people can look and touch and see the differences easily.” Some of the new cabinets of late have been crafted to launch an entirely new series of slot games, while others are versions of cabinet groups already on the market, tweaked to serve a new purpose. “They’re not really all brand-new cabinets these days,” says Orchard. “I think the manufacturers have gotten quite smart at making sure they’re more derivative, so, there’s a commitment to a base cabinet which has underlying functionality and technology, and compatibility with your operating system and your game li-
brary. And then, how can you derive that and iterate that to create different form factors, ultimately to create a different gaming experience?” “We need to make sure it’s not just hardware for hardware’s sake,” says Konami’s Walther. “The philosophy is to concentrate on what are we going to do with this hardware that’s going to get us to leap with content and appeal to our players.”
Toward the New Standard Just as in the consumer technology space, all of the technological advancements in the cabinet space have resulted in a standard for gaming hardware that is constantly changing. As technology advances, suppliers tap the changes to add to the list of absolute necessities in a slot machine cabinet. The quality of video and graphics is a prime example. The higher the definition in video that is widely viewed on digital TV or even smart phones, the more suppliers are pushed to improve the image on slot machine displays. “The advancements in LEDs and LCDs—and those floating screens and edgeless devices—has really been key the past few years,” says Orchard. “A lot of the bells and whistles these days are really to attract. What we hope, and the way we study and do our industrial design and engineering, is that once you sit and engage the device, those peripherals sink away into the background, and it’s the game and screen that stand front-andcenter for the player.” The graphic quality of 4K video is now becoming more of a requirement, says Everi’s Ehrlich. “We’re seeing that the more technological advancement we’re putting into our graphics, the better,” he says. “As people are playing games that are no longer stick figures and dots, and are more photo-realistic, we need to be more photo-realistic ourselves. As people are used to engaging with advanced game technologies on their iPhones and Androids that look more realistic, they need to engage those same types of symbols, smooth spins and bright color contrasts that we get out of our MARCH 2019 www.ggbmagazine.com
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“I think we’re seeing a shift in the market and demand for more single screens, more portrait-oriented games. But I think there will always be some form of stepper cabinet to a degree, and there will always be some kind of dual-screen video.” — Dean Ehrlich, Executive Vice President and Games Business Leader, Everi Holdings
monitors and our designs. “If it starts to look like you’re playing 1990s technology, people will say it’s a bit passé, unless it’s a complete home-run throwback game that they are completely accustomed to. Going forward, most people are going to want to play product that uses the latest and greatest capabilities.” Burke at AGS adds that another advancement in LCD and LED technology that has become a must for new slot hardware is the brightness of the image on the monitor. “I know monitor brightness seems like a funny one, but people have, in their living rooms, very highend televisions that can be bought fairly cheaply these days,” Burke says. “So, that matters. Any time Apple releases a new product, that screen is brighter, it’s higher density; it’s just a better quality. On our end, that has to be the same.”
Driven by the Game
Konami’s KX43
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Everi’s Ehrlich notes that the existence of advanced technology does not necessarily mean success within
Global Gaming Business MARCH 2019
advanced hardware. “Do we believe older players need to have the most cutting-edge, high-def video displays? Most likely not,” he says. “But it depends on how you’re using the new technology to communicate to players, and whether that requires more horsepower than what they’re previously accustomed to.” Ehrlich says that in the end, the hardware adjusts to the requirements of the games themselves. “Our strategy builds on what our internal product roadmap is and what we’re aiming to accomplish through our game innovations,” he says. “There are certain features and functionality we want to get accomplished, and some of the hardware we currently have doesn’t accommodate that. I’ll give you a simple example: a game with a mechanical wheel on it for the three-reel mechanical genre. Not the most innovative element, because it’s been out there for 20 years, but it’s new to Everi and obviously very recognizable to the player.” Orchard says IGT operates on a similar philosophy. “We really are using that hardware as a way to segment our portfolio,” he says. IGT, in fact, has cabinets which incorporate technologies like gesture control (in Sphinx 4D) or PowerSight technology (in the latest Sex and the City game) that were developed for specific games. Even so, Orchard says technology such as that in the TRUE 4D series is another response to general consumer technology. “3D is becoming more prevalent in the mainstream, particularly in the film industry, so that is something we were ahead of and continue to be ahead of with glasses-free 3D technology,” he says. “With gesture, we’re enabling the player, without touching the screen, to play with their symbols and play with their bonus screens, for an even more immersive experience.” Konami is another supplier that is working 4K video definition into its product roadmap. “When you look at something like the KX43 cabinet, it was our foray into the pure 4K space,” says Walther. “Concerto Opus was an oversized version of the technology, because 4K works well on such a
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“I would love to see things like Bluetooth beaconing. Imagine if you could walk up to the cabinet and it recognized you.” —Andrew Burke, Senior Vice President of Slot Products, AGS
large platform. But when you look at something that’s more on the core gaming platform, the KX43 is our way of introducing 4K technology into our product base, and distinguishing itself from our existing product line.” In addition to amping up the high technology on new products, when it comes to cabinets, some form factors remain the same. In fact, in the mechanical reel-spinning genre, R&D dollars are often spent to make the experience more retro. “Even in the advancement of all these kind of new, sexy cabinets, there absolutely is still room for core cabinets that I believe will stay in place for a long time,” says IGT’s Orchard. “Core video is one. Even though you’ve got some of the curves out there, for the most part, that core video experience and the core video player demands consistency. So you’re seeing incremental evolution there, as opposed to some incredibly fast evolution in other parts of the portfolio. “And the biggest one, in my opinion, is stepper. In fact, right now, with our next-gen designs and our rework of the S3000 cabinet, we’re actually going back to a more retro look and feel. Because that player base demands it, and the position of those games on the floor demands it, particularly if it’s in a high-limit room. I believe inside the mechanical reel business and the core video business, there needs to be incremental change rather than highvelocity change” Everi’s Ehrlich agrees. “Three-reel mechanical? We believe the classic mechanical player doesn’t want a lot of change,” he says. “But, we change hardware outside the playing area to help merchandise themes and/or play mechanics, so players can see what they’re looking for a bit easier. We’ve got to make it easier for the player to understand the value proposition. 24
Global Gaming Business MARCH 2019
“We believe we’ve seen a shift in the market for more single-screen, portrait-oriented video product. But we also believe there will always be some form of a three-reel stepper cabinet, and there will also be players that prefer dual-screen video as well.”
Cabinet Futures The advance of technology is rapidly changing the definition of a slot cabinet, and that definition is now as fluid as technological advance in general. IGT already produces cabinets including charging stations for smartphones, as well as Bluetooth functionality. “Regulations will continue to drive how well and how much they are adopted as we move forward,” says Orchard. Five years from now, Orchard predicts there will be cash-free slot play. “We envision a world in three to five years where there’s really little cash at all on the casino floor, and we’ve got to make it a more connected experience,” he says. “Those are the key ways we’ve been integrating technology into our hardware to keep up with market trends, and also, the evolution of our demographic.” Burke at AGS notes that the evolution of cabinets will, in some jurisdiction, require or follow regulatory changes. “We have a team that’s trying to always explore where the jurisdictional requirements are going, and how we can be on the cutting edge of some of those requirements,” he says. “I would love to see things like Bluetooth beaconing. Imagine if you could walk up to the cabinet and it recognized you.” Konami’s Walther predicts hardware design will adapt to consumer technologies like those in mobile games. “I think you’ll see games that are
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appearing in a physical cabinet at the casino and games that are appearing on mobile devices and in other venues looking a lot the same, although the experiences will be slightly different,” Walther says. “In five years, I think you will see player user interfaces that are different from today. I think that is an area where things have been evolving most. We’ve gone from two rows of buttons to a digital deck to a digital deck with some screen interfaces, etc. I think how people engage with their gaming product on the floor will be an area where things will evolve. “USB ports have become standard, but I think you will see non-gaming devices start to separate themselves from USB. If you look at what you see in the market with what Apple and Android are doing, they’re not using USBs for much anymore. They’re not even using headphone jacks anymore. So, things are becoming more wireless.” Beyond that, Walther says the speed of technology outside of gaming will affect what hardware looks like in the future. “Technology is advancing in other areas and other segments,” he says. “Look at electronic funds transfers that we do with ApplePay and Venmo. I think you will see cabinets evolving to take advantage of consumer trends happening outside of the gaming space, whether that’s near-field communications we’re putting into our Synkros system, or wireless charging. I think you’re seeing us adapt to how consumers consume technology.” “More screen, less actual hardware, bigger footprint,” predicts Burke
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at AGS. “Not necessarily taking up more space, but a bigger player surface. I think all those things are coming. I do think that smart things like wireless phone chargers and the ability to quickly recharge your tablet or mobile device are intelligent things going forward. “Also, the lighting experience is very important to us. We spend a lot of time thinking about how the lighting interacts with the game. It’s not one thing that makes a cabinet; it’s a thousand little things that come together. “We collectively, as an industry, are building more ergonomic and smarter cabinets that are more comfortable for players to play, and are designed to give players a superior entertainment experience. “Once you create an award-winning cabinet, like we did with Orion, you see the returns on it. You have to have a whole strategy built around hardware, and you have to have a whole roadmap built around hardware. We’ve really built our whole business plan in R&D around developing new hardware out into the future.” Says Everi’s Ehrlich, “We believe the market will see new advanced panels, some iteration of curve, advanced sound packages, etc. We also believe there’s going to be some level of hardware play-mechanic elements. What will be the next wheel that’s going to drive the market? “It will be done with the mindset of a value proposition for the player, and not just designing a cabinet for the sake of designing a cabinet. And that’s what all the manufacturers are going after.”
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Pennsylvania’s Big Gamble When it comes to bringing in the bucks, Pennsylvania gaming is a proven winner. Could high taxes and big buy-ins handicap this race? By Marjorie Preston
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or total gaming taxes, Pennsylvania is No. 1 in the U.S., surpassing even Nevada. No wonder lawmakers love it. It was 2004 when former Governor Ed Rendell pushed casinos as a way to create jobs, cut property taxes, benefit host communities and prop up a struggling horse racing industry. Since then, the industry has grown from a single racetrack slot parlor to a dozen casinos scattered across the state: inside a former steel plant in Bethlehem; near hallowed ground in Valley Forge and Gettysburg; at a onetime honeymoon hotel in the Poconos; in a onetime Philadelphia sugar refinery; overlooking the Pittsburgh waterfront; and elsewhere. Despite steep tax rates—54 percent on slots, 16 percent on tables, plus multimillion-dollar license fees—the industry continues to thrive. A 13th casino, Philly Live!, a project of the Cordish Companies, is on track to open next year. And that’s not all. In 2017, a sweeping industry expansion plan made room not only for sports betting and iGaming but minicasinos, truck stop gaming and airport VGTs. Some analysts are concerned that lawmakers have come to see gaming as an ATM, a well where they can withdraw cash whenever they need it, in lieu of belt-tightening, raising taxes or trimming services. A September 2018 editorial in the Delaware County Daily Times said legislators “never met a bet they didn’t like. Every time the state needs money, it decides to roll the dice.” Is Pennsylvania pressing its luck? 26
Global Gaming Business MARCH 2019
‘Wag the Dog’ Gaming consultant Robert Ambrose says the Pennsylvania market isn’t too crowded—yet—and growth has been “cautiously slow, consecutive, steady,” as properties expand both their gaming and non-gaming products. “The diversity of casino locations throughout the state geographically presents great opportunities for sustainability in Pennsylvania,” Ambrose says. But he has reservations about the ongoing expansion. “As long as state power brokers view gaming as a tax source, they’ll keep initiating things like truck stop casinos and satellites. The question is, at what point does the market become oversaturated? We won’t know that until operations begin to fail.” Moreover, he adds, the source of all those revenues, consumers’ wallets, isn’t inexhaustible. “The state tends to forget that discretionary spending— which may not be discretionary at all in some cases— also goes into the lottery, and adding mini-casinos begins to take away from the entire model. In a state the size of Pennsylvania, at what point does cannibalization take place?” Steve Gallaway of Global Market Advisors says industry growth should be based on market demand, not the demands of lawmakers looking to plug budget holes. Gaming in Pennsylvania has worked so far “because of the rich gaming market in the Northeast corridor, but it has its limits for the long-term success of the product,” he says. “But the high tax rates prevent casinos from evolving into full destination integrated resorts; there’s
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“Gaming in Pennsylvania has worked so far because of the rich gaming market in the Northeast corridor, but it has its limits for the long-term success of the product.” —Steve Gallaway, Managing Partner, Global Market Advisors
not enough profit left over to justify large-scale capital projects.” (That’s not universally true, he adds: the likely new owners of Sands Bethlehem, Wind Creek Hospitality of Alabama, plan to invest $190 million into the project, adding a 300-room hotel and possibly an indoor water park.) “State and local governments should not pass gaming with a desired budgetary number in mind,” Gallaway continues. He suggests that regulators have been “victims of wag-the-dog politics as legislators use gaming to fill the budget gap as opposed to making tough budgetary decisions or looking at additional revenue options.” But high taxes and license fees haven’t kept operators away, notes Doug Harbach, spokesman for the Pennsylvania State Gaming Control Board, who insists that concerns about higher taxes and potential saturation have so far been unfounded. “We’ve seen continual increases in our gaming revenues year-on-year, even after opening the 12th casino,” he says. Pennsylvania casinos set new records for profitability in 2018, generating more than $3.2 billion in revenues, of which state and local governments pick up about $1.3 billion. Originally, Harbach says, Pennsylvania casinos were seen mostly as locals properties, not necessarily tourism destinations, but that’s changing, too, with the Sands expansion and upgrades elsewhere: Rivers Casino in Pittsburgh, for example, just opened a $3.5 million event center, and in 2017 was approved to add a $55 million hotel.
market, between major properties. It seems to be logical, and we don’t on the face have concerns about oversaturation now, but we won’t know until some of these properties open.” Saturation is likeliest in the Philadelphia metro area, which soon will host three casinos: Philly Live!, Harrah’s Philadelphia and SugarHouse. The latter—a property of Rush Street Gaming, which also owns Rivers in Pittsburgh—fought for three years to keep Live! from being built in the city’s stadium district, but finally dropped its objections in 2017, after Governor Tom Wolf repealed the state’s ownership restriction on casinos. SugarHouse and Harrah’s plan to remain competitive with sports betting and iGaming (though the latter is up in the air with the DOJ’s recent waffling on the Wire Act). In January, SugarHouse opened its sports book just in time for the Super Bowl. Harrah’s quickly followed, moving 187 slot machines to make room for its sports betting facility. Harrah’s also added a dedicated poker room and interactive sporting games including Topgolf Swing Suites, which includes variations like virtual Zombie Dodgeball.
To the Limit According to Harrisburg news outlet WITF, the limits of the state’s aggressive gaming expansion became apparent last year, when licensed operators failed to snap up all 10 available mini-casino licenses. But Harbach says that’s proof the market is finding its own level. “We auctioned five licenses and got no more bids. In the future there’s the option to open up the auction process for five more satellite casinos, but the market will gauge what’s enough.” After those bids are vetted and approved, the mini-casinos—maybe not so mini with up to 750 slot machines and 40 gaming tables—will be located in “underserved areas” across the state, including two inside vacant mall department stores, Harbach says. Michael Soll, president of The Innovation Group, says high tax rates “so far have not been prohibitive” to operators who want to do business in the Keystone State. The mini-casinos “do not necessarily constitute a saturated market, and they were allocated and distributed so they fit into gaps in the
Constuction is under way for Philly Live!
MARCH 2019 www.ggbmagazine.com
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“I think Pennsylvania compares favorably to similarly regulated markets. As far as the latest wave of licenses, I think anyone would want to take a step back and see how they’re absorbed before new competition is introduced.”
In December, Harrah’s Philadelphia General Manager Chris Albrecht told the Gaming Control Board that “the combination of these three new assets will really allow for some increased play in the overall facility, as well as on slots and tables.” “We’re a local-regional facility here,” Albrecht observes, “with folks coming from the tristate area for a two- to threehour experience. For us, it’s about how we continue to serve our core customers—a Philly fan is an avid fan—and make —Michael Soll, President, The Innovation Group some new ones along the way.” The property also offers 150 live racing days a year and daily simulcasts from major parks like Belmont, Saratoga, Del Mar and Gulfstream. When it comes to Philadelphia, Harbach concedes there may be “some robbing Peter to pay Paul” after Live! paydays, both for the state and operators. “The American Gaming Association opens. Concerns about new competition could extend to the Parx and Valsays there’s approximately $160 billion of sports betting going on underley Forge casinos, both about a 30-minute drive from Philadelphia. But ground annually. If you pull some of that aboveground, legalize it and regulate Harbach says Live! could also bring in an all-new customer base, people who it, it has the opportunity to be a significant market. Again, we have a high tax stop in at the casino after attending nearby sporting events. rate according to some experts, higher than Delaware or New Jersey, but that In Ambrose’s view, Live! will “exceed all expectations,” benefiting from hasn’t kept operators from applying and getting these places open.” traffic at Xfinity Live, a dining and entertainment corridor at the Wells Despite critics’ assertions that Pennsylvania gaming has become a cash Fargo Complex, and its proximity to major interstates and Philadelphia Ingrab, “we’re trying to do this right, to protect the public,” Harbach says. ternational Airport. “We’ve been deliberative in getting things up and running, looking long-term “Harrah’s and SugarHouse are more isolated along the water, and their rather than short-term.” footprint is different,” he says. “How they’re able to step up their game Look for airport gaming terminals sometime down the road, after online through marketing offerings and amenities will determine how they sustain gaming is up and running, and as for those truck stops, the pile-on effect will their place in the market.” be negligible; so far, 65 locations around the state have applied, and those that qualify will have only five machines per unit. “It’s never going to be a huge Truckin’ market,” says Harbach. “Even if 50 operators qualify, we’re talking about a As for sports betting in Pennsylvania, can operators hope to turn a profit total of 250 machines statewide.” given the 36 percent tax rate, the highest in the nation? Critics have called All in all, says The Innovation Group’s Soll, “Pennsylvania compares fathe figure “ridiculously high” and “a serious disincentive” to new business; vorably to similarly regulated markets. As far as the latest wave of licenses, I in Pennsylvania, there’s also a $10 million upfront license fee for sports betthink anyone would want to take a step back and see how they’re absorbed ting. before new competition is introduced at any point, and I expect that to hapEric Schippers, senior vice president of Penn National Gaming, railed pen.” last year that the push for higher revenues in Pennsylvania “not just squeezes Ambrose advises existing operators to “tap into their own respective marthe golden goose but strangles the goose.” kets on a consistent basis with strong loyalty dividends and special promotions “Double-digit tax rates are always a challenge for operators,” agrees Amalong with a great property experience” to solidify their customer bases going brose. “Online and sports betting are game-changers for all properties in forward. “If a property fails to ‘identify and promote’ to each of their niche every state, and it’s just beginning—in Atlantic City, both are lifelines durmarkets,” he says, “their bottom line could fall short.” ing the off season.” He argues that states should consider tax rates “with cauGallaway, meanwhile, sees a parallel between gaming proponents in Hartion,” always keeping sustainability in mind. risburg and Russell Long, the late Louisiana senator and Washington kingpin “This is not a cure-all for budget shortfalls, and high tax rates impact who famously said, “Don’t tax you, don’t tax me, tax that man behind the long-term growth. New Jersey has taken a more reasonable approach with tree.” the tax structure at 15 percent for sports betting, and Nevada sports betting Gallaway calls the 2017 gaming expansion “dipping into the well too returns 6.75 percent to the state. Seven to 15 percent is a more logical apmuch, with bureaucrats picking numbers to fill the budget as opposed to what proach.” the industry wanted or could support.” But Harbach defends the Pennsylvania model, and looks forward to big 28
Global Gaming Business MARCH 2019
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GLOBAL GAMING WOMEN
Invest in Yourself Global Gaming Women’s educational offerings give members a way to add skills and expertise
I
n recent years, discussions around what drives successful businesses have begun to focus on the concept of “investing in people” as a key corporate strategy and a vital component to building a successful corporate culture. This has become a selling point for businesses trying to distinguish themselves from their peers as a company that values its people—a sometimes overlooked or undervalued asset. A recent Forbes article advocates that investing in employee development is crucial to longer-term success, as it increases employee retention, boosts reputation, increases employee innovation, and helps with sound succession planning. As professionals in a dynamic, competitive and rapidly growing industry, we have a companion responsibility to take ownership of the investment in our own development. For those ready to tackle their professional goals in 2019, but that may have struggled to find quality, affordable ways to access development opportunities, Global Gaming Women can help. GGW was established to “support, inspire and influence the development of women in the gaming industry.” In other words, to provide opportunities for women to invest in themselves and their fellow professionals, ultimately, maximizing the positive impact we can have as industry leaders, trailblazers and role models. A foundational GGW offering that supports this mission is the core “pyramid” educational conferences offered each year, which are specifically tailored to gaming-industry women as they advance through each step of their careers. These conferences are facilitated by experts in leadership training, and delve into topics around soft skills, like team-building and effective communication. Many also include modules led by subject matter experts around a variety of topics like casino marketing, the basics of finance and more. The ever-popular “dine arounds,” which feature small-group conversations with industry leaders sharing their personal stories of career growth and success, are also a component of each offering. Not only do these conferences offer tan-
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Global Gaming Business MARCH 2019
By Cassie Stratford
gible tools to encourage and nurture professional growth, they include valuable opportunities to connect with peers and well-known industry leaders so attendees can build their professional networks outside of their own company, but in a smaller-scale setting. Once you’ve witnessed the buzz of conference graduates at the end of a program, it is impossible to deny the tangible impact of GGW on our industry professionals. Countless women who have attended these programs offer enthusiastic accounts of how the conference helped propel their professional careers and enrich their personal lives. One shining example is Tiffany Widdows Sides, executive director of marketing operations for Station Casinos. She is a proud graduate of the W Development program and a GGW board member. She chairs the marketing committee, and has emphasized how grateful she is for having GGW in her life—the relationships she has made through GGW have brought her job opportunities, as well as friendships. In fact, she credits GGW for her current position at Station Casinos. If she had not met and connected with Staci Alonso (former CMO at Stations and GGW board member) at the W Leadership Conference, she would not be with Station Casinos in her current capacity. For 2019, GGW has a full slate of no-cost offerings already planned, which are highlighted below. The Front Line Leaders conference is geared to industry women with at least one year of experience in a supervisory or first-level management role. Leadership Development is intended for women with at least three years in a managerial role, with responsibilities over a shift or functional area, and the W Development program is for women with at least five years of experience in a role that is the most senior position in a department, area of responsibility, business unit or organization. Participants for each conference will be se-
lected from a pool of applicants from across the various sectors of the gaming industry and across many jurisdictions. Most offerings are limited to fewer than 30 attendees to preserve the unique, small-scale environment that maximizes the return for each individual. We encourage interested applicants to apply early and keep an eye out for additional offerings and new ways to access the GGW content, as the organization continues to find innovative ways to achieve its goal of offering accessible professional development opportunities to all industry women willing to make an investment in themselves. For more information about GGW or any of its program offerings, visit globalgamingwomen.org, reach out to any of our board members or contact Felicia Gassen, association director, at info@ globalgamingwomen.org. Western Front Line Leadership Conference March 12-13, 2019 - Las Vegas Application Deadline February 11
Western Leadership Development Conference March 25-27, 2019, Las Vegas Application Deadline February 11
Southern Leadership Development Conference April 23-25, 2019, Hollywood, Florida Application Deadline March 4
W Leadership Development Conference May 1-3, 2019, Las Vegas Application Deadline March 15
Midwest Leadership Development Conference May 14-16, 2019, Location TBD Eastern Leadership Development Conference September 9-12, 2019, Atlantic City, NJ Western Front Line Leadership Conference November 19, 2019, Las Vegas
Cassie Stratford is vice president of legal affairs and assistant general counsel, Boyd Gaming Corporation and serves on the GGW Board of Directors as the Executive Committee and Education Committee co-chair.
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Beating the Odds California tribes stretch limits of IGRA By Dave Palermo
T
he Maidu Indians of the Enterprise Rancheria in the 1800s lived along the Feather River near Oroville, California, a once-lush waterway some 70 miles north of Sacramento that vanished with construction of the Oroville Dam in the 1960s. “The river was central to our people’s lives,” tribal Chairwoman Glenda Nelson of the Estom Yumeka Maidu Tribe told the Marysville Appeal-Democrat. “We would fish from its waters and gather along its banks. Our ancestors went where the river flowed.” The Mono Indians of the North Fork Rancheria resided in the 1800s in the Eastern San Joaquin Valley and Sierra Nevada foothills near Yosemite. “There was no Madera, no Merced, no Modesto and no Fresno,” wrote Joe Kinsman, who settled the area in 1849, married a Mono Indian and raised children who are ancestors of the tribe. “All of the settlements were in the foothills. The entire valley was desolate of human habitation.
Hard Rock Hotel & Casino Sacramento at Fire Mountain, owned by the Enterprise Rancheria, is slated to open in 2020
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“Antelope, deer, elk and wild horses ranged all over the valley and adjacent foothills.” Roughly 170 years later, Maidu and Mono Indians of Central California—victims of a tortured history of genocide and stolen land spurred by the Gold Rush and European settlement—are about to embark on a new and prosperous era as operators of tribal government casino resorts. Enterprise Rancheria, in partnership with Hard Rock International, a corporation owed by the Seminole Tribe of Florida, was scheduled in mid-February to top off an eight-story, $470 million gambling resort near Maryville in Yuba County. And North Fork Rancheria, in the wake of a January U.S. Supreme Court decision not to hear a lawsuit by opponents to its casino project, can now proceed with construction of a gambling resort on Highway 99 in Madera County, a partnership with Station Casinos of Las Vegas.
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“So many tribes already have gaming establishments. That will be the reason for the diminishing applications, not necessarily the fact that the process is expensive and takes such a long time.” —George Skibine, former official with the Department of the Interior, now an attorney in private practice
Doing the Two-Step Acquiring ancestral lands and getting necessary state and federal approvals for the casinos have proven to be arduous and expensive undertakings for the two tribes, an endeavor lasting more than 17 years. The projects have been stalled by bureaucratic procedures, legislative opposition and a litany of failed litigation by opponents of the gambling resorts, including casino tribes fearful of competition. But tribes seeking to enter the gambling industry have come to expect similar obstacles. “Given the complex web of federal, state, local and tribal interests involved, the land-into-trust process is long and arduous,” wrote attorney Heidi McNeil Staudenmaier in the Nevada Law Journal, particularly when the land is for casino gambling. And it is likely Enterprise and North Fork will be among the last new casino developments in a maturing and in some regions saturated tribal gov-
ernment casino industry comprised of 500 gambling operations in 29 states. The Indian Gaming Regulatory Act (IGRA) largely limits casino development to tribal trust lands in existence when the act was passed in 1988. But there are Section 20 exceptions for newly recognized and restored tribes and property acquired in federal Indian land claims. IGRA also allows tribes to develop casinos on land off existing reservations, a process referred to as “two-part determinations” because it requires approval from the governor and proof a casino is in the best interest of the tribe and not harmful to nearby Indian and non-Indian communities. That is the process utilized by Enterprise and North Fork. But getting approval from the U.S. Department of the Interior and its Bureau of Indian Affairs under any Section 20 exemption is a long and expensive endeavor, often fraught with politics and likely to result in years of litigation. The process grew more complex with the 2009 U.S. Supreme Court ruling in Carcieri v. Salazar, which limited Interior’s authority to place
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Thunder Valley Casino Resort, owned by the United Auburn Indian Community, is the dominant player in the Sacramento market
land in trust for tribes. “It’s a high bar to clear,” says Bryan Newland, chairman of the Bays Mills Indian Community of Michigan and a former counsel with Interior. “You have to incur millions of dollars of expense to compile the material needed to get through the bureaucratic process. Then, if you get a favorable decision, there’s the legal cost to defend the decision in court. “The process has become very difficult.” Meanwhile, opportunities in what has become a $32 billion tribal casino industry have dried up. About 250 of 370 tribes in the lower 48 states operate reservation casinos. Another 80 or so receive funds from tribal casinos or lease machines. Others are too remote or lack land on which to build casinos. “With some exception, the Indian gaming market is fully developed,” Newland says. “There are tribes seeking to become new entrants into the gaming market. But by and large, most federally recognized tribes that want to engage in gaming are already doing it. That is another reason we’re seeing fewer and fewer of these applications.” “Clearly, the market is getting saturated,” agrees Dentons attorney George Skibine, an Oklahoma Osage and former high-ranking Interior official. “So many tribes already have gaming establishments. That will be the reason for the diminishing applications, not necessarily the fact that the process is expensive and takes such a long time.” “The easy ones have already been done,” tribal attorney Judith Shapiro says of the trust land casino development in the early years of IGRA. “There hasn’t been a lot of growth. That’s been true for a long time.”
Building Out A Mid-State Market
North Fork and Enterprise are planning to build out a mid-state region that already consists of Thunder Valley Casino Resort, Table Mountain Casino, Cache Creek Casino, Colusa Casino Resort, Chukchansi Gold Resort & Casino and others. Caesars Entetainment and Boyd Gaming are also developing properties in the Sacramento area. “The bottom line is you’re introducing a large competitor—in fact, more than one—into an existing market that is already very competitive,” says Alan Meister, CEO of Meister Economic Consulting and author of the annual Indian Gaming Industry Report. “You’re talking about adding very high-quality facilities with a lot of amenities. “There’s no doubt introduction of new facilities is going to impact the existing casinos. The question is how much.” A California casino executive who requested anonymity says Hard Rock will both cannibalize and grow the mid-state market, enticing gamblers from San Francisco and Lake Tahoe. “It is a highly competitive area,” the executive says. “You’ve got some significant powerhouses here in this region with Cache Creek offers 2,300 slot machines, Cache Creek, Thunder Valley and some smaller properties more than 120 table games, a 14-table north of here. poker room, day spa, nine restaurants, and an 18-hole championship golf course “It’s not a brand new market. I wouldn’t call it a mature market, either. It’s somewhere in the middle as it continues to grow. The population continues to build here and there’s demand. “Is there capacity for the market to double? I don’t know. Hard Rock will probably steal some market share, but it will grow the market as well. It will draw people from Tahoe and San Francisco and even more south and north than what existing operators are bringing.” Doug Elmets, spokesman for the United Auburn Indian Community, operators of Thunder Valley, believes Hard Rock
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will have a “limited impact” on the resort’s business. United Auburn is one of the tribes that sued to block the Enterprise project, working in conjunction with Stand Up For California. The Chukchansi and Colusa tribes lobbied against the North Fork effort. “Thunder Valley is the dominant casino for the region, for a good reason. We have the best location,” Elmets says of the casino’s proximity to Sacramento. “We also have invested heavily for years in marketing and advertising and customer loyalty programs.” The resort, initially operated by Station Casinos, has a highly experienced management team. “That’s not an exaggeration,” Elmets says. “The level of experience is invaluable when faced with new players in the market.” Lori Nelson, vice president of corporate communications for Station Casinos, would not discuss the North Fork project. “If/when the time comes to share any news or updates, we’ll make sure to give you a call or have someone from the tribe speak with you,” Nelson said in an email. North Fork Tribal Chairwoman Elaine Bethel-Fink discussed the project in a brief telephone interview but cut the conversation short and did not respond to additional telephone and email requests for comment.
Two-Parts Are Rare Since IGRA was enacted in 1988, only seven tribes—including Enterprise and North Fork—have managed to successfully hurdle the bureaucratic, political and legal obstacles involved in a two-part determination exemption to launch a casino operation. From 30 to 40 other tribal groups established casinos on newly established reservations through the other Section 20 exemptions, also long and expensive but much easier than the often politically volatile two-part determinations. Other tribes have pursued federal recognition, trust lands and later casino ventures through congressional legislation outside Section 20. Neither Enterprise nor North Fork had much choice, both lacking suitable land for a casino. Enterprise Rancheria, created by the federal government in 1915, consisted of two, 40-acre parcels in remote foothills north of Oroville. One parcel was sold in the 1960s to build the dam. The tribe, consisting of 800 members, purchased 40 acres of land near Highway 65 in Yuba County, roughly 36 miles from its tribal headquarters in Oroville, seeking to place the land in trust for a casino. The North Fork Rancheria, though it has 1,800 members, consisted of 80 acres of inaccessible foothills in Madera County. The land was held in trust by
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“The problem is not with IGRA. The problem is with Carcieri.” —Tribal gaming attorney Judith Shapiro on the difficulty of obtaining land for landless tribes
fewer than five members of the tribe. The tribe purchased 305 acres of land along Highway 99, also about 40 miles from its rancheria. “Our tribe is located in a poor, rural county with high rates of unemployment and poverty,” Bethel-Fink said in a letter to a local newspaper. The Rancheria, she wrote, “is a remote, inaccessible piece of land that is owned by individual tribal citizens (not the tribe) and is wholly inadequate to conduct meaningful economic development for our people or the surrounding community. “Lacking a functional reservation, we remain essentially landless, but not hopeless.” The projects complied with Interior rules and regulations. Interior on September 1, 2011 issued favorable rulings to place their land in trust status for gaming. “Both tribes have historical connections to the proposed gaming sites and both proposals have strong support from the local community, which are important factors in our review,” Larry Echo Hawk, former U.S. assistant secretary for Indian affairs, said in approving trust lands for the projects. Governor Jerry Brown signed onto tribal-state compacts the following year. But the bureaucratic process was interrupted by a slew of lawsuits by nearby casino tribes and Stand Up For California, a self-described community watchdog group. Voters, in a 2014 referendum targeting North Fork’s tribal-state compact, rejected “off-reservation gaming.” It was an odd ballot initiative in that it would not have not have prevented the tribe from operating a Class II bingo casino on the site. Interior in 2016 invoked secretarial procedures to allow Class III, casino-style gambling for both Enterprise and North Fork, accusing the state of bad-faith negotiations.
Carcieri, Competition Muddy IGRA Waters While IGRA essentially limits gambling to reservations established when the law was enacted in 1988, framers of the act added Section 20 36
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exemptions to provide “equal footing” for tribes not initially eligible for casinos. “Section 20 made it clear that Congress wanted an avenue for tribes newly recognized or had land acquired in trust to have the same opportunity as everybody else,” Newland says. Alex Skibine, an Oklahoma Osage and University of Utah law professor, who served as deputy counsel for the House Committee on Interior and Insular Affairs when IGRA was drafted, says limits on tribal gambling were a political necessity. But so were Section 20 exemptions. “We basically compromised in drafting the act,” says Skibine, brother of attorney George Skibine, who was quoted earlier in this article. “But we said we wanted to have those exceptions.” “If you’re a tribe that was deprived of land—whether your land was stolen or whether federal recognition was terminated or never acknowledged—when you come back you’re supposed to be equal with everybody else,” tribal attorney Shapiro says. Most legal scholars commend IGRA’s authors for drafting Section 20 exemptions that have worked well for tribes and stood up to legal scrutiny. But signees to the act didn’t contemplate how successful the industry would be, or that it would create cutthroat competition between existing tribal casino operators and new entrants to the market. They also did not anticipate the 2009 Supreme Court decision in Carcieri v. Salazar where justices ruled that Interior could not place land in trust for tribes not “under federal jurisdiction” with enactment of the Indian Reorganization Act of 1934. Justices did not define “under federal jurisdiction,” giving anti-gambling groups and tribes opposed to new competition legal ammunition to contest Section 20 petitions. The opponents may have lost the legal battles, but the lawsuits and appeals seriously delayed projects. “The opposition from existing tribal casinos was not anticipated,” Alex Skibine says, “nor was Carcieri,” which allows opponents to question whether Interior has the authority to place land in trust for gambling. “The problem is not with IGRA,” Shapiro says of the difficulty in acquiring land for casinos. “The problem is with Carcieri.” Many Indian scholars contend Section 20 allows tribes to establish casinos outside their ancestral lands, encroaching on the territory of other indigenous groups. Newland says it is a “natural response” for gambling tribes to oppose new Indian casinos encroaching on their market, particularly when one takes into consideration the fact casinos generate government revenues. “If you have a tribe with gambling revenues generating $50 million for its tribal government, the tribe over time becomes reliant on those funds,” Newland says. “Some tribes generate more than enough to provide for their tribal governments. But I’m not interested in making moral judgments. “Tribes use gaming revenues to fund their governments. But tribal
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gaming is a business. Tribal facilities compete with one another. Opposition to new casinos is a natural, competitive response.” A tribal source who requested anonymity says opponents to the Enterprise and North Fork projects knew IGRA exemptions would stand up to court scrutiny. “It would have been a danger to tribal sovereignty if any of these lawsuits prevailed,” the source says. “But it was all stalling tactics from day one. “They (opponents) wanted to make it so onerous and difficult for any tribe to pursue a two-part determination that there would never be another two-part endeavor in the state. “I think they succeeded. They succeeded in making the two-part process almost impossible.” Pamunkey tribal Chief Robert Gray says he would consider operating a casino in Norfolk, Virginia under commercial law rather than IGRA. Attorney Rory Dilweg, who for a dozen years represented the Menominee Tribe in its failed attempt to build a casino in southern Wisconsin, agrees it may be easier to operate outside of IGRA’s two-part determination process.
“Settlement of a land claim is pretty straightforward. And it’s still worthwhile going for initial reservation exemptions,” Dilweg says. But a two-part determination “can be delayed so long by lawsuits a tribe is better off seeking a commercial license and operating on fee lands.” The Loyal Shawnee of Oklahoma recently reached agreement with Interior and Governor Mary Fallin on a two-part determination to build a casino on newly acquired trust land near Guymon, 370 miles west of the tribe’s headquarters. “We’ve worked hard to set ourselves on the path to a better future, and this project will help us achieve our goals of tribal self-sufficiency through economic progress,” tribal Chief Ron Sparkman says. And North Fork Chairwoman Bethel-Fink, in her brief telephone interview, encouraged tribes to do whatever it takes to avail themselves of the benefits of government gambling. “All tribes have the right to game,” she said. “One of the things I would say is to persevere, to move on. It can be a long road and there are all kinds of bumps in the road.”
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Solving the Las Vegas Strip Value Problem There’s not just one Las Vegas Strip value issue that needs to be solved, but at least three By Jeff Hwang
Q
uestion: Is there a solution to the Las Vegas Strip value problem? The first thing we need to do is to recognize that there’s not just one Strip value problem here that needs to be solved, but at least three, all of which are related: 1. The Las Vegas Strip casino hotel supply problem 2. The gambling value problem 3. The nickel-and-dime culture To recap, the Las Vegas Strip casino hotel supply problem—which I first proposed in the August 2017 issue of GGB (“The Millennial Problem”)—is in large part a function of the Strip hotel casino supply imbalance created by the process of literally imploding the old low-end hotel casino supply (Sands, Desert Inn, Dunes, Boardwalk, Frontier, Stardust, Riviera, etc.) and replacing it with strictly 4- and 5-star supply (Venetian/Palazzo, Wynn/Encore, Bellagio, Aria/City Center) and/or, in some cases, nothing (the New Frontier and Stardust replacements are about a decade past due, and the Riviera land is now part of the Las Vegas Convention Center expansion). To reiterate, the problem is not so much that Strip hotel ADRs have been on the rise—this is what you expect to happen when you re40
Global Gaming Business MARCH 2019
place the Boardwalk with Aria—but rather that there is an increasingly disproportionate lack of low-end hotel casino supply on the Strip. This in turn has led to the probability that we are unwittingly pricing out the more populous, lower end of the Las Vegas visitor market and stunting visitor growth outright. Indeed, 2018 marked the second straight down year in total Las Vegas visitor volume, marking only the third time Las Vegas has posted two straight years of visitor declines since 1970 (the first year for which the Las Vegas Convention and Vistors Bureau shows visitor data). The previous two incidences coincided with U.S. economic recession (198182 and 2008-09), while the current softness comes at a time when unemployment is low and consumer confidence is high. Meanwhile, the fast-growing Las Vegas convention business posted a decline in attendance for the first time since 2010. Note that the rise in ADRs is understated, as the stated ADRs do not account for the rapidly increasing resort fees, which now add approximately 25-30 percent to ADRs. Resort fees first hit the Strip in 2008, and thus went from $0 in 2007 to a current range in the neighborhood of $29 to $45.
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LAS VEGAS VISITOR VOLUME Total Visitors Year
Volume
Change
Convention Attendance
Non-Convention Visitors
Las Vegas Strip
Volume
Volume
Hotel ADRs
Change
Change
2013
39,668,221
-0.15%
5,107,416
3.31%
34,560,805
-0.64%
$119.53
2014
41,126,512
3.68%
5,194,580
1.71%
35,931,932
3.97%
$125.80
2015
42,312,216
2.88%
5,891,151
13.41%
36,421,064
1.36%
$130.08
2016
42,936,109
1.54%
6,310,600
7.12%
36,625,500
0.56%
$135.87
2017
42,214,200
-1.68%
6,646,200
5.32%
35,568,000
-2.89%
$137.22
2018
42,116,800
-0.23%
6,501,800
-2.17%
36,615,000
0.13%
$138.82
Source: LVCVA
But the lack of low-end casino hotel supply on the Strip is not the entirety of the Strip value problem.
The Strip Gambling Value Problem In the February issue of GGB, the question was posed about the future of blackjack: Will millennials ever cozy up to it? This question is typical of gambling discussions regarding millennials in that it assumes that it is the player that is fundamentally changing. But the reality is that blackjack came to dominate the casino floor and help power the growth of the casino industry primarily because of three key features: 1. The game was beatable. 2. Under basic strategy, blackjack was the lowest-edge card game on the casino floor. 3. Due to the above, blackjack was the game that the sophisticated gamblers (non-idiots) played and wanted to be seen playing. The problem is, none of those things are true anymore. And it is not so much the player that has changed, but the game. The house advantage of casino games in general has been on the rise for over two decades. This is obvious with regard to slot machines, when we look at the rise in slot hold percentages; but it is also true of table games, and can be observed through the changes in blackjack. To combat card counting and raise the house advantage of blackjack in attempts to make it more profitable, casino operators have made a number of “enhancements” (bastardizations) to blackjack over the past couple of decades: 1. Utilized continuous shuffling machines (CSMs), which eliminate card counting risk. 2. Implemented 6:5 blackjack—first as a way to offer “single-deck blackjack,” before going ahead and slapping it on multi-deck shoe games as well—which added 1.39 percent to the base house advantage, while also effectively eliminating card counting risk. 3. Added high-edge side bets to “spice up” blackjack, while raising the effective combined house edge on all money wagered on a blackjack table. 4. Simply replaced blackjack tables outright with newer proprietary games, which often carry significantly higher house edges than blackjack. The result is that blackjack has become increasingly marginalized. Where blackjack accounted for 77.2 percent of tables and 50.3 percent of tablegame revenue on the Las Vegas Strip in 1985, blackjack only represented 50.1 percent of units and 30.5 percent of table-game revenue on the Strip in 2017. We should first note that the decline in blackjack’s contribution as a
percentage of revenue is also largely attributable to the rise of higherend baccarat; that said, the key figure is the table game mix: Non-traditional games (including Three Card Poker, Let It Ride, Pai Gow and other proprietary games) accounted for 17.3 percent of table game units on the Las Vegas Strip in 2017, whereas such games only accounted for 1.1 percent of the Strip table games mix in 1985 (3.2 percent if you include Wheel of Fortune).
LAS VEGAS STRIP: BLACKJACK TABLE COUNT Year
Units
% of Units
Revenue
% of Revenue
1985
1,010
77.2%
$357.2 million
50.3%
2000
1,515
59.3%
$744.7 million
33.1%
2017
1,280
50.1%
$923.5 million
30.5%
Source: Center for Gaming Research, University of Nevada, Las Vegas
The reason for blackjack’s decreasing relevance is not an increasing lack of interest in the game of blackjack itself, but rather a concerted effort on the part of the casino operators to destroy it. This is not hyperbole. Instead, it’s simple economics: When you raise the price of blackjack (by making it unbeatable and raising the house advantage), you lower the demand for “blackjack.” And casino operators as a group clearly do not want to offer blackjack in any traditionally likeable form. Put differently, when the Fed wants to stimulate the economy, the Fed lowers interest rates. If casino operators actually wanted to stimulate blackjack activity, they would simply revert to the more traditional, low-edge, countable—and beatable—formats. Most large casino operators have simply decided that this is not worth the headaches that prompted the changes to begin with (or at least not at reasonable stakes), and have allowed smaller, forward-thinking casino operators—notably TI on the Strip, South Point a few miles south of the Strip; and the El Cortez, the D and Golden Gate on Fremont Street Downtown—to carve out a niche in Las Vegas by offering predominantly or exclusively 3:2 blackjack (we might call these places “3:2 friendly”). The next question that needs to be asked, then, is why this is a problem. Well, first of all, the problem isn’t that Bellagio, Wynn and the VeMARCH 2019 www.ggbmagazine.com
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Do you think that nobody’s noticed?
What’s happened is that the now analytics-driven industry has taken a “let’s see what we can get away with” mindset that has caused the industry to push every incremental envelope, while completely missing the big picture.
netian don’t offer $5 3:2 blackjack, but rather that nobody else on the Strip does, either. Moreover, some of the casinos that might have been in a position to do it (e.g., New Frontier, Stardust, Riviera) no longer exist because we imploded them. It’s also worth noting that the mergers that allowed MGM and Caesars to control the bulk of Strip real estate and block competition have also contributed to the 6:5 epidemic. But as a result, what we have on the Strip is a topheavy, incomplete product that largely only offers reasonable gambling options to mid-to-high-stakes gamblers, and does not reflect the range of Las Vegas visitors. The big-picture issue here is that there is no romance in the casino anymore. When blackjack was beatable, there was a reason to read strategy guides, and room for a subculture of non-idiot casino gamblers to develop. Poker stories are cool, and blackjack card-counting stories are cool; Three Card Poker stories are not, which is why there aren’t any (serious) books about Three Card Poker strategy or adventures. Furthermore, when the house advantage is too high, there’s no incentive for the player to even bother taking the time to learn strategy. Back in 2015, I wrote something similar to the above (Google “The Death of Blackjack”) and introduced a concept I called the skill-free rate. The gist of the skill-free rate is that the house advantage on the pass line in craps—which requires no skill—is 1.41 percent on the base unit, or 0.37 percent per unit wagered if you bet the (mostly Strip standard) full 3X-4X-5X odds. The 1.41 percent and 0.37 percent figures in effect represent the skill-free rates given a level of action (a conversation for another day). But the implication is that if you are going to offer a game requiring skill (e.g., blackjack), the house advantage under theoretically optimal play on a per-unit-wagered basis has to be at least under 1.41 percent, and probably in the neighborhood of 0.37 percent or less, depending on the amounts wagered and the amount of skill required to achieve it—the higher the action or the more skill required, the lower the house edge under theoretically optimal play should be on a per-unit-wagered basis. This is not what’s happening. Instead, the house advantage of new games tends to be higher than the games that came before them. Thus, there is no incentive to learn strategy for complex games; this in turn has led to the trend for casino operators to focus on simplistic games requiring no “strategy”—Three Card Poker can be played perfectly with one strategy rule (play Q-6-4 or better, and fold everything else). As a consequence, there are fewer and fewer games for non-idiot gamblers to play, and there is nothing in the casino worth talking about. There is no way to market these games directly to the gambler because the house advantage is often higher than the game that came before it, so you can never tell the gambler what the proposition is. And as such, 42
Global Gaming Business MARCH 2019
casino operators are unwittingly pricing nonidiot gamblers out from gambling in any significant volume.
The Nickel-and-Dime Culture: How Did We Get Here?
That prices are rising on the Strip isn’t necessarily bad in and of itself—rising prices can be interpreted as a sign of health in the form of increasing pricing power. What’s more troubling is the nickel-and-dime approach to raising prices on the Strip with the creative use of new, increasing, and/or hidden fees. These include increasing resort fees, which serve to obscure the rapidly rising prices of hotel rooms by artificially lowering ADRs. These also include new fees such as paid parking, and also hidden service fees that show up on restaurant bills, and eventually on Twitter. This also includes the aforementioned rise in the casino house advantage. It doesn’t take much imagination to figure out how we got here. The underlying logic that justifies the continual hike in the casino house edge is that the gambler can’t tell the difference between a 5 percent house edge and a 6 percent house edge. Nor can the gambler tell the difference between a 6 percent and 7 percent house edge, or between a 7 percent house edge and an 8 percent house edge, or between an 8 pecent house edge and a 9 percent house edge. This is the logic that gets us from European roulette with a single zero and a 2.70 percent house edge, to American roulette with two zeroes and a 5.26 percent house edge, to Vegas triple-zero roulette with a 7.69 percent house edge. This is the logic that got us from single-deck blackjack with a 0.15 percent house edge to multi-deck blackjack with a 0.50 percent house edge, to 6:5 single-deck blackjack with a 1.45 percent house edge, to 6:5 eight-deck games with a 2.02 percent house edge. This is also the logic that got us from zero resort fees on the Strip in 2007 to $15-$25 resort fees at MGM properties in 2008, to ubiquitous resort fees on the Strip as high as $45 today. Do you think that nobody’s noticed? What’s happened is that the now analytics-driven industry has taken a “let’s see what we can get away with” mindset that has caused the industry to push every incremental envelope, while completely missing the big picture. The question that seems to be asked is whether raising a price here will result in increased profitability in the short term; the question that seems to be overlooked is the extent to which doing so will damage your brand in the long run, and if there might be a less hideous way to go about raising prices. The question is not whether it is legal or if you can get away with it; the question you should be asking is whether the customer will hate you and never want to come back.
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Solving the Las Vegas Strip Value Problem(s) The first step to solving these problems is to recognize that we have them, and also acknowledge that these are, in fact, problems. The likelihood is that we are pricing out the low end of Las Vegas visitors and stunting growth in the process; and the likelihood is that we are also stunting gambling volume because the house advantage keeps climbing, and because there are fewer and fewer games for non-idiot gamblers to play at reasonable stakes. As I have argued many times before, what needs to happen on the gambling front is that in addition to finding practical ways to drive down the stakes (for example, with the use of electronic table games), the gaming industry needs to find ways to drive down the house advantage—at least under theoretically optimal play—in order to broaden the appeal of the casino floor. One of the challenges on the Strip specifically is that the rise in the house advantage is, in part, a function of the general rise in prices on the Las Vegas Strip, again related to the imbalance in the hotel casino supply. It is probably not a coincidence that virtually all of the “innovations” in house edge-based price gouging in traditional table games—6:5 blackjack, triple-zero roulette, 2X odds craps—seem to originate or at least gain traction on the Strip. Which brings us back to the casino hotel supply problem.
At this stage, my view is that the Strip proper is a bit of a lost cause—with a crystal ball, the thing to have done would have been to go back to 2006 and simply not blow up the New Frontier, Stardust and Riviera to begin with. And given the value of Las Vegas Strip real estate, there doesn’t seem to be much of an appetite to build even 3-star casino hotel supply, certainly not along Las Vegas Boulevard between Mandalay Bay and SLS. There might be, however, room for development along these lines east of the Strip facing Flamingo Boulevard and Tropicana Boulevard. I do have high hopes for Fremont Street Downtown, which over the course of this current decade has turned into a happening place, though perhaps not yet a legitimate alternative for those who once might have stayed on the Strip. Derek Stevens’ Circa Resort & Casino—slated to open December 2020 on the site of the former Las Vegas Club—might just be the beginning of a redevelopment/expansion that sets up Downtown Las Vegas as a legitimate Strip alternative that more properly fills the void at the lower end of the market. Jeff Hwang is a game developer and president of High Variance Games LLC, and is the best-selling author of Pot-Limit Omaha Poker: The Big Play Strategy, the three-volume Advanced PLO series, and The Modern Baseball Card Investor. Follow Hwang on Twitter at @RivalSchoolX.
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SURVEILLANCE SPECIAL REPORT
Guns and Gaming: Armed or Unarmed? Does it make sense to arm your security guards? By Alan W. Zajic
M
any casino executives have been struggling with the topic of guest and team member safety over the recent past as incidents involving guns and shootings in gaming environments receive a heightened attention. Currently, most casinos in North America do not have armed security officers. As gun incidents continue to escalate throughout the U.S., casino operations will eventually need to meet the increasing risk and deploy some form of countermeasure to deal with it and attempt to keep their properties as reasonably safe as possible. While the typical response by law enforcement to an incident inside a casino is usually after the incident has been concluded, having armed security personnel may be prudent if a careful and deliberate analysis is conducted prior to deployment. A few land-based casino corporations have gone to the development and deployment of Security Emergency Response Teams (SERT) that are trained and armed to respond to dynamic incidents involving weapons. This process limits the number of armed security personnel and the associated training and costs including wages. SERT teams have been used in many casinos in the past, especially during special events when customer volumes are increased and condensed in one area such as a concert or sporting event. Some other casinos arm exterior security patrol officers in vehicles or bicycles for a method to respond inward when necessary. This process has been successful in some Las Vegas Strip properties and casinos in certain metropolitan areas. The process uses a perimeter layer of enhanced security that can respond anywhere they are needed. Although armed SERT teams are far from the common practice, they demonstrate that major casino companies are moving toward at least a few security personnel who are experienced, trained, adequately equipped, and experienced to respond to incidents. The massive size of some casino resorts still creates some delay in internal response. Some casinos hire former law 44
Global Gaming Business MARCH 2019
enforcement or military specialists and pay them comparable wages. Not all casinos can accomplish this. I have received calls from casino executives who are interested in making their properties as safe as possible, and dealing with the complex issue of deciding if security personnel should be armed, if they even can be armed by law, and how to implement a policy, procedure and training to equip personnel with the right knowledge and weapons to do the job. The process to decide should be very careful and deliberate when it comes to having your security officers carry lethal weapons that have a much higher risk of fatal results or very serious injury. A single firing of one round that strikes an innocent bystander could not only be devastating to everyone involved; it can be costly to manage any litigation, can cause enormous negative public perceptions and relations, and can impact an operation in many ways. The wrestling with the decision whether to arm security officers or not is an age-old one that dates back centuries. Taking into consideration the additional risk that having employees with guns creates, and the potential for something to go wrong, the decision should involve a comprehensive review and independent risk assessment before a final decision is made. The following are some considerations to consider when conducting a needs assessment, and making the decision to arm security officers.
Legal Authority to Arm Security Personnel In many jurisdictions and especially on tribal lands, there are codified prohibitions for anyone, including security officers, to carry or possess weapons on any reservation or tribal property. The first serious review should involve if it is even possible from a legal perspective in the first place. In some instances, it requires the approval of the chief of police of the local police department, sherriff’s office or tribal police. In others, it is prohibited by law under any circumstances.
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With additional requirements of more comprehensive background checks, psychological evaluations, competency for response to incidents, and having the ability to be trained, many casinos would be hard pressed to find qualified candidates to function as armed security officers in a crowded casino.
A legal review should be accomplished to determine if it can be done in the first place and what the legal exposures are. Some operations have solved this concern by hiring off-duty, sworn police officers to be present on their property, in full uniform and in marked police vehicles, as a potential deterrent and to allow for rapid response to incidents involving weapons. Some urban police departments do have a prohibition for police officers to work in uniform for a casino property, and often other agencies such as the county sheriff’s office have that ability. Many operations have been able to accomplish this at a higher cost per hour, with the end result being positive for deterrence and response. Ideally, the presence of a police officer should be from dawn to dusk, or at least 12 hours. A review of past incidents will also dictate times that would benefit from a law enforcement presence. Other properties have difficulty in first, getting police officers to volunteer for the overtime duty, second, coming up with an agreement or memorandum of understanding (MOU), and third, managing the police officers when they are on a property to assure they are deployed effectively. The use of off-duty police officers is by far the less complicated and least expensive method to have someone armed on a property with the full powers of a sworn police officer. If this method is available, I would certainly recommend it be considered.
Liability Insurance Always of concern is the impact that arming security may have on claims and insurance premiums generally, and in the event of an incident where litigation occurs, future premiums. Coverage levels should be evaluated to cover the typically higher claims costs involving shooting incidents. Generally, insurance providers will have questions regarding the policies, procedures, training and equipment carried to determine if premiums will increase and by how much. With larger, multi-property companies or tribal operations, the power of volume in negotiations will play a role in insurance quotes. Surprisingly, many insurance carriers do not increase premiums if there is an organized plan to reduce the risk of an incident involving a security officer discharging his weapon and injuring a patron or employee with “friendly fire.� In some cases, limiting weapons to security managers and supervisors has positive effect on actuaries who determine premiums. And finally, there are carriers that simply will not provide a quote to casi-
nos that arm their security personnel with lethal weapons. I would suggest that after conducting a legal review to determine if it is even possible, the research to determine any additional cost in liability or crime insurance should be completed. Insurance carriers will also advise what they would require if security officers carried and potentially used weapons inside or outside of a casino.
Labor Pool and Wages Almost every security professional I know reports difficulty filling basic security officer positions with even slightly qualified candidates with any experience. This can be as high as 20 percent of the total security complement. Injecting into that labor market complication, the additional requirements of more comprehensive background checks, psychological evaluations, competency for response to incidents, and having the ability to be trained, many casinos would be hard pressed to find qualified candidates to function as armed security officers in a crowded casino. As with contract security companies across the U.S., armed security officers typically are paid a higher hourly rate based on the higher occupational risk and in order to draw qualified candidates, especially in rural casino locations. Bringing on higher-paid security personnel to be armed will almost always create issues with existing security personnel who want the chance to be armed and make more in wages. Realistically, most security directors will admit that there are many of their security officers that they would not allow to work armed due to various reasons. From a management perspective, any armed security officer will need to have more frequent background checks completed to assure they have not been in incidents with law enforcement that involve any violence, including domestic violence. In cases where security personnel have been involved, cited or arrested, the common practice is to remove the weapon from that security officer, reduce their wages, and monitor them unless the charges turn out to be unfounded. Additionally, security officers employed to carry weapons should naturally be checked against databases where persons are prohibited from owning or possessing a weapon by law regardless of the reason. If your property cannot fill basic security officer positions with qualified applicants, you probably should not arm your security officers.
Equipment and Supplies Every professional in charge of security in a casino has different ideas and
MARCH 2019 www.ggbmagazine.com
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SURVEILLANCE SPECIAL REPORT
The local police chief or sheriff can be helpful in developing your policies and procedures.They should include company policy, equipment mandates, and instructions on the use of lethal force, liability training, and de-escalation of incidents.
philosophies about whether armed security officers should carry their own weapons, ammunition, holsters and other equipment or if it should be provided as a work tool by the employer. A careful analysis should also be made when making these important decisions. Employers should determine what equipment security officers use, to include type and caliber for consistency and to make sure an individual security officer does not bring in a weapon or ammunition that is unauthorized. Weapon capacity in magazines also is a factor to evaluate. Some security directors only allow revolvers and others only allow semi-automatic handguns. Another key piece of equipment is the primary holster that is used on the duty belt. Triple- or double-retention holsters have safety provisions that make guns more difficult to grab by an uncooperative suspect. Other controls including additional magazines or speed loaders should also be controlled, as well as type and color of leather gear for the duty belt. This is also an important factor for evaluation when deploying armed security personnel in a crowded casino environment. Weapons should also have a mandated schedule for cleaning, inspection and replacement of ammunition at regular intervals. Conducting surprise inspections of armed security officers’ weapons and gear is also productive for compliance to mandated procedures.
Policy and Procedures As a lethal weapon, the carrying and use of sanctioned weapons should have comprehensive policies and procedures to assure all security officers follow the desired protocols and do not make their own interpretation. The local police chief or sheriff can be helpful in developing your policies and procedures. They should include company policy, equipment mandates, and instructions on the use of lethal force, liability training, and de-escalation of incidents. Additionally, protocols should be in place for automatic incident review by a “Use of Force Committee� to complete an after-action review and recommend disciplinary action (if required), and to recommend future policy changes.
Training Training of personnel in use and carrying of lethal weapons is by far the most important function before allowing weapons on your property. Almost every U.S. state has statutory laws or administrative codes that ad-
46
Global Gaming Business MARCH 2019
dress armed contract security officer training to include syllabus and length of training. Some properties believe that if supervisors carry weapons concealed, that they should have a Concealed Weapons Permit (CCW), which also requires specific training that is different from contract security requirements. The property training should at least match the state standards for training in both of these areas, regardless of sovereignty interpretations. By meeting or exceeding the state training standards, a first important step in meeting the legal standard of care can be accomplished, including refresher training and intervals. Classroom training will typically involve review of jurisdictional codified laws, pertinent case law, use of force, de-escalation, scenario-based training, and safety. Additionally, training may include weapon operational functions, maintenance and care of weapons, holster retention, targeting and other areas. Situational training is valuable, and is recommended by most security professionals who teach security personnel the important and judicious use of force for a casino environment. Actual range practice also is important to assure all armed security officers maintain their proficiency. The actual firing of a weapon in training keeps the perishable skills intact and assures that a particular security officer has not developed vision loss or other changes in critical senses or reaction time. Although hiring ex-law enforcement personnel who have had extensive training is beneficial if you can find them, the training should not be bypassed, regardless of the level of experience. Range practice and qualification intervals start at twice per year, and many operations require quarterly qualifications for security personnel. This also creates a hard cost for wages and equipment, and should be considered in the overall analysis. Careful review of the range qualification process should be documented and maintained. In closing, a comprehensive documented review of the security operation to include a risk, threat and vulnerability assessment would be prudent prior to making the decision to arm security officers in a casino. Alan W. Zajic CPP, CSP, ICPS, is a nationally recognized, board-certified expert in security and surveillance, with over 35 years of practical, hands-on experience. Zajic is a court-certified expert in many jurisdictions across the U.S. Contact Zajic at alanwzajic@aol.com.
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ART MANTERIS VP Race and Sports Book Operations Station Casinos LLC
SETH YOUNG Chief Innovation Officer PointsBet
JESPER SVENSSON CEO Betsson Group
ED COMINS President Webis Holdings
SCOTT KAUFMAN-ROSS VP of Fantasy & Gaming NBA
KRISTIAN NYLEN CEO Kambi
DAVID REBUCK Director NJ DGE
SHEILA MORAGO Executive Director Oklahoma Indian Gaming Assn.
WALT FALES SVP of Strategic Development, Enterprise Gaming Caesars
ANDY LEVINSON Senior Vice President Tournament Administration PGA Tour
EXHIBITOR PREVIEW
For more information, please visit www.sbcevents.com/bosa2019
BOSA_21.27cm_x_27.62cm_Tribal_Government_Gaming_March.indd 1
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SURVEILLANCE SPECIAL REPORT
De-Tokenization
C
e m i t s ’ t I d i r t e g o t ! s p i h c f o Allison By Willy
all me crazy, but I’m convinced it’s time to get rid of casino chips. It’s time for casino table games to go digital like the rest of the world. How can you run table games without chips, you ask? They go together like fish and chips or chips and salsa. Hang on, hear me out. I not only think those germ-ridden little pieces of clay are troublemakers, they’re holding casinos back in the 21st century. When and why were chips introduced to gambling in the first place? I’ve asked a few authorities in the casino industry this question, and no one really knows. The most common answer is that chips have been part of the casino business since the beginning of time. I was forwarded an article that suggested the arrival of chips in gambling (in the form we know today) happened around the 1880s. Although I know some casino guys in Vegas that worked in casinos back then, they couldn’t tell me why chips were introduced to casinos. If I were to guess, the obvious reason would be to help casinos determine who owned each bet and to help make payment of winners a lot quicker. No less of an authority than David Schwartz, author of Roll the Bones: The History of Gambling, says the birth of chips is unknown. “The use of non-monetary markers to denote sums used to gamble with is as old as gambling itself, so it is impossible to identify a single origin point,” he says. Times have changed since 1880. More than 90 percent of transactions in the U.S. are now done digitally, mainly through the use of some sort of smart card, like a credit or debit card. Transactions are quick. Verification of ownership is quick. There is a digital trail. People don’t have to worry about getting mugged when they walk down the street. Society has long accepted the benefits of digital currency. It’s the way commerce is conducted in today’s world... except for casinos. As we step into the table-games pit we go back in time. We’re asked to bring cash,
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change it to chips, and then change it back to cash at the cage. Back in 2000 I started to question why we use chips. The casino I worked in got whacked with a counterfeit chips scam that cost us over $400,000. I began to think about the trouble they brought to casinos. Quite frankly, as a game protection guy, chips have always caused a lot of problems. Over the last five years, I feel the case to digitize table games has gotten stronger. We are in a digital world that has seen businesses become more successful through getting the right information quickly and efficiently. In some markets, table games are stagnant. I believe going digital could benefit the way we manage table games. It could even revive them.
17 Reasons To Get Rid of Chips This is a change issue. A great man once said you don’t need multiple reasons to change something, you only need one good reason. If you’re looking for only one good reason to go digital on table games, I would say it’s accountability. But that being said, I’m going to give you 17 good reasons to get rid of chips.
1. They Take Up Space Chips need to be stored somewhere: usually in a room. If they’re not in the chip bank, they’re in three other places: on the tables, in the cage window drawers or with players. Casinos carry two sets of chips in case they are hit with a large counterfeit scam and they have to replace the originals. Often chips sit for years in chip bank rooms gathering dust. A lot of space is required to store both sets of chips.
2. Transportation is Time-Consuming Chips are cycled from the chip bank to the table games. The chip bank
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employs a cashier to be on hand 24 hours a day to prepare fills and verify credits going to and from tables. Security officers are taken away from their general role of providing security to become a delivery person for table games. If the fills are large amounts, internal controls often dictate that a surveillance operator has to monitor the transportation of the chips to the table. The process of verifying chip deliveries usually involves stopping a game and verifying delivery amounts. It’s time- and resource-consuming.
3. Counterfeit Chips
5. They Slow the Game Down Converting cash to chips. Converting low denominations to high denominations. Converting high denominations to low denominations. Calculating how many chips in a winning bet then calculating, preparing and paying a stack of the correct amount of chips. Sorting chips in the chip tray so the floor supervisor can calculate if a table is winning or losing. The fills. The credits. The opening procedures. The closing procedures. All these processes slow the game down!
6. They Attract Cheats
Casino chips are relatively easy to counterfeit. Yes, most chips have some sort of secret identification mark. If staff are lucky, they may even be RFID. But quite frankly, most staff in casinos don’t know what to look for to verify a chip and most staff don’t have the time. The threat of counterfeiting is even bigger today because of technology and really good Chinese copycats.
The most common way of cheating on table games is late betting. Past posting, bet capping, bet pinching. They are all scams involving manipulating chips after the result. The key word here is chips. No chips, no two-bit cheating.
4. Surveillance Can’t Tell How Much the Bet Is
7. Robbery
When a surveillance operator is watching a game or reviewing video of a game using the standard directly-over-the-table view, they can’t see how many chips are on a bet. To verify the exact amount they have to zoom in live while they’re watching it with a PTZ camera so they can count the edges of the chips. Sometimes you may ascertain the amount of chips in a stack by previous payouts, but sometimes bet recognition through an overhead camera is best described as an educated guess.
Chips openly displayed on table games are tempting for brazen desperados. Snatch-and-run robberies at the Bellagio and Venetian in recent years have netted individuals over $1 million each. The manner in which chips are openly displayed on table games not only increases opportunities for thieves, it puts our dealers in harm’s way.
The most common way of cheating on table games is late betting. Past posting, bet capping, bet pinching. They are all scams involving manipulating chips after the result. The key word here is chips. No chips, no two-bit cheating.
MARCH 2019 www.ggbmagazine.com
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SURVEILLANCE SPECIAL REPORT
8. Employee Theft
13. Dexterity Wouldn’t Be Required
Chips are easy for staff to steal. The common way is to slip out one or two higher-denomination chips on a daily basis. The amount is not significant on a daily basis, but over the staff member’s career, the numbers can be staggering. Last year a dealer in Macau incredibly stole over $6 million in chips in one hit.
If casinos got rid of chips, training for dealers wouldn’t take so long. Payouts wouldn’t have to be calculated. Dealers would not have to be trained in chip work. Dexterity wouldn’t be required. Dealers could focus on providing a fun customer experience.
9. Players Stealing from Players A common problem with mega-size casinos (150-plus gaming tables) is players stealing other players’ chips, mainly on non-card games like roulette, sic bo or craps. They steal the chips off the betting layout or from the player’s bankroll on the edge of tables. Often, surveillance is called on to identify who stole the chips. In effect, surveillance is distracted from protecting the house to protecting customers’ individual interests.
10. Dealers Colluding with Players Without doubt the largest criminal threat in relation to suffering immediate losses to the game itself is collusion. Although the largest collusion scams usually involve dealers assisting players obtain information of future results, there are often smaller amounts of money being shoveled out to players by rogue dealers who see the opportunity to skim a bit off the top by paying “dirty stacks” of chips or just downright paying too many chips without being caught.
11. Dealers Make Mistakes Oh yes they do. Until we replace them with robots, they’ll always make mistakes. A common area where mistakes are made is in the “take and pay” procedures. This is when the results have to be determined and winners and losers are dealt with. Chips in, chips out. It is not uncommon for dealers to mistakenly miscalculate results and incorrectly pay players. Digitization would eliminate payout errors, since computers would be doing the taking and paying.
12. Ownership Disputes Except for roulette, chips are generic. They all look the same, without any distinguishing features that the chip actually belongs to an individual. On non-card games, especially unlimited player games like big six and sic bo, there are often patron disputes over who placed a winning bet. Surveillance resources are called upon to adjudicate. Serial disputers are commonplace.
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14. Floor Supervisors Can Lose the Clipboards A big part of the role of a floor supervisor is to track chips coming and going. They move around their tables counting the table’s chips and the players’ chips and making notes on a clipboard. It’s funny watching the floor supervisor stare down a winning player’s bankroll at the edge of the table or go into full CIA investigation mode when players are “going south” with chips. Digitizing the game would allow floor supervisors to focus on providing a fun customer experience (see a trend here).
15. Easier to Manage Tips Managing tips for dealers in a large casino is a process unto itself. A dealer taps a toke. A toke goes in a box attached to the table. Boxes are collected once a shift or day. Tokes are counted under a camera. Money is divvied up. The whole process runs in parallel with the casino’s own cash drop box collection. It’s a daily performance that takes time and effort and relies on a lot of trust. If tables were digitized, tips could be counted, divvied up and sent to a dealer’s bank account instantaneously.
16. Cleanliness and Health I wasn’t going to go there, but I will. I remember reading a study years ago about a test conducted on the cleanliness of casino chips. I won’t go into the details. I’ll just say it was nasty. From personal experience I can relay a story that I have never forgotten. It’s about a dealer that almost passed out and had to be taken off a table. I was watching the game in surveillance and noticed a gambler was picking his nose profusely and playing blackjack. I’m talking boogie wonderland all over the chips. The dealer was terrified. I called my work mates over to the screen to check it out. We sat and watched in horror as he placed his boogar-capped chips on the betting square. I’m pretty sure everyone except for the player was thinking what we were thinking in surveillance—please God, let him win! He won the first hand. Phew! He won the second hand. Phew! And then it happened. He lost. The dealer almost passed out as she took the losing chips and placed them in the float. She couldn’t deal the next hand and was escorted out in a shade of green.
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SURVEILLANCE SPECIAL REPORT
But Here’s the Main Reason That was 16 reasons just off the top of my head for getting rid of chips. There are probably a lot more I haven’t thought of, but it’s my 17th and final reason that has tipped my way of thinking in recent years and convinced me that table games will never reach their full potential unless we get rid of chips.
Unlike most businesses in the 21st century that make annual revenues of millions of dollars, there is no digital trail of betting transactions at the tables. Table game operations are like large banks without receipts.
17. Accountability Accountability means the obligation of an individual or organization to account for its activities, accept responsibility for them, and disclose the results in a transparent manner. Table games have always fallen short when it comes to tracking the money accurately. Unlike most businesses in the 21st century that make annual revenues of millions of dollars, there is no digital trail of betting transactions at the tables. Table game operations are like large banks without receipts. Casinos give players lots of free stuff based on guessing. We ask a floor supervisor to scan the ever-increasing amount of tables they are responsible for and estimate the average bet of each of his players. Sometimes that means up to 50 players coming and going at the same time. This estimate and some other information like time played and win/loss are written down by hand and entered into a computer. The computer uses a simple program that calculates a set percentage of the player’s estimated turnover. Based on what the floor supervisor has estimated, the player is credited with free stuff (often a lot) to entice future play. The problem is the data entered is a guess. It’s an old boys club system that relies heavily on competency and trust, but it’s far from an accurate account of transactions that take place in a casino. At best, we can agree that it’s a close guess. Unfortunately, the system is open to collusion between the raters and the rated. Surveillance audits of player comping regularly shows inaccuracy up to 30 percent in most cases. Sometimes it’s collusion. Sometimes staff just feel that over-rating players provides stronger job security. If a customer complains they are underrated by a floor supervisor, they may be called out by management. It’s just easier and there is less chance of repercussions if you rate on the high side. It’s hard to calculate how much over-comping costs the casino industry as a whole. Random surveillance audits only cover a small sample size. But that’s the point. If we got rid of chips and went digital, our industry would be more transparent and would be able to accurately account for every transaction. We would clean up a flawed system open to fraud, inaccuracies and guesswork. Another problem that has surfaced in recent years is casinos not complying with anti-money laundering laws. If you haven’t heard, federal governments take this stuff seriously. In the last few years, casinos have been fined millions of dollars for non-compliance with AML laws. One of the issues where casinos have been falling down is sloppy internal accounting and controls. Digitizing all betting transactions would help 52
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the process of complying with audits and investigations by providing authorities with a transparent system of identifying players and tracking the money. It would save a lot of time for surveillance and compliance departments and ensure speedy and accurate information is passed on to authorities.
What’s Needed to Make Table Games Digital?
Don’t ask me. I’m not an IT guy. All I know is what’s in my wallet, and I can tell you it’s not chips or even cash. It’s smart cards. In my other pocket I have an iPhone with Apple Pay. No one’s denying there would be challenges to overcome. Issues that would have my table game friends from the 1880s engaged in spirited banter down at my local barbershop. There’s always someone in the room who thinks Rocky Marciano was better than Joe Louis. I find when it comes to offering new ideas to table game people, I’m almost certainly met with the player acceptance argument. I find that this age-old argument is usually based on personal agendas and take it with a grain of salt. I like to remind my table games friends about our brothers across the way in the slot department. They’re the ones that now produce 65-90 percent of revenues on the gaming floors across the U.S. I remind them how successful they’ve been with their loyalty card programs, their data mining, targeted marketing and computerization of play information and transactions. Yeah, the slot business really went south after they got rid of the handles and the tokens. Initially, the challenge in table games would be digitizing all tables with touchpad betting surfaces and smart card validators. Systems would need interfaces to results, shoes, etc. There are smart table products currently out there that essentially incorporate all aspects of a normal game. Video analytics and AI products are being developed by CCTV customers. We are on the cusp of digitization in table games; it’s just a matter of, do you go hybrid and wait or do you jump in and go fully digital now? “Oh, no, but table game players are different.” Yes, they are different. No argument there. But let’s stop and think for a moment. Think about how it could be if your table game players carried your casino’s cash card and used it to purchase things all around the world. Think about your card being placed on the hotel counter of the Burj Khalifa or in the world’s top restaurants or clubs. Am I being evil by suggesting that your players shouldn’t leave home without it? Digitization of table games could open up a new world for casinos. Casinos could become banks—with receipts. Willy Allison is a casino surveillance professional who started in the industry in 1987 as a surveillance operator. His career progressed into various surveillance management roles that allowed him to experience and take advantage of opportunities in an expanding global industry. Over a 15-year casino operations career, Allison worked in Australia, Asia, South America and the U.S. In February 2006, Allison founded the World Game Protection Conference, being held this year March 3-6 at the Tropicana in Las Vegas. For more information, visit WorldGameProtection.com.
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MAKING MY POINT
Be Cool Lessons from nightclubs
T
hink who you think is the greatest thinker in history. Then think again. Newton? No way. Socrates? Soc-ra-please. Marcus Aurelius? You can’t be serious. Albert Einstein? Well, if we use Roman numerals, then the square of MC is not E, it’s 12.1 million. Because M is 1,000 and C is 100, so if you multiply… eh, forget it. No, when it comes to sheer intellectual prowess, the type of brain power that only reveals itself once in the lifespan of an entire species, there can only be one winner. And for sapiens, homo, that is … Whoever came up with the concept of bottle service. You take a fifth of Jack Daniels that costs $35, put it in the hands of a woman wearing an outfit skimpy enough to make Britney Spears blush, and yada, yada, yada, that will be $1,000. Plus gratuity. Roll over Descartes and tell Da Vinci the news: Ding-ding. We have a winner. Just look at what’s happened with nightclubs over the last 15 years. Really look at it. Not with envy, but with awe. Hakkasan, Intrigue, Marquee, et. al. have thrown the Las Vegas Strip into the throes of one-upmanship not seen since Mystere, Siegfried and Roy and Danny Gans duked it out for showroom supremacy in the late 1990s. Then there are the DJs. Marshmello. Diplo. Deadmau5. The dude that was dating Taylor Swift for a while. The dude that never wore a shirt on the Jersey Shore. The dude that uses an umlaut over his name. Then there are the music festivals. Life is Beautiful. Electric Daisy Carnival. iHeartRadio. Or Huckabees. Can’t ever keep those two straight. As our industry—and dozens of others— struggles to solve the Rubik’s Cube that is the 20and 30-something consumer, look no farther than that long line of short dresses, high shoes, cheap cologne and expensive sunglasses that’s snaking past your slot machines and into the sound of pounding music. Because that queue has the answer. Or at least the front of it does, as the ingredients that lure people into these clubs—and
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By Roger Snow
restaurants and other entertainment complexes— can also be used to lure them away. Here’s how:
Be cool! You might assume that at such stratospheric prices, the alcohol served in these clubs must be something special. Something unique. Something that you can’t buy at any old watering hole like Cheers or Moe’s or the Regal Beagle. Well, sorry, Norm, Homer, Jack, Janet and Chrissy, but you’d be wrong. It’s the same old booze you can buy here, there and everywhere. So, what’s the secret? What’s so compelling to make someone overpay for a common commodity? The environment. These nightclubs have managed to mangle together a menagerie of elements— exclusivity, mystery, excitement—that combine to create a habitat that can be defined in one word.
Cool. Our business must do the same. The age of buildit-and-they-will-come is dead… or extremely sleepy. Looks matter, and the eye candy everybody wants—in terms of décor and design, from the carpet to the wall coverings to the lighting—must make its way out of the clubs and into the table pits and slot sections.
Be energetic!! At one of the hottest restaurants in one of the hottest resorts in Las Vegas, you dine amid a din that would drown out a jackhammer. It’s basically a nightclub that serves steaks. It’s dark and it’s sexy, and oh yeah, it’s loud. Huh? What did you say? It’s whaaaaat?
It’s Loud!!! Oh, and it’s also crowded. Overcrowded, in fact. Which of course is a problem most establishments would kill to have. Our business must do the same. And some already are, taking a section or two on the floor and creating a whole new vibe. They darken the lights. They crank the music. And if they had a dry ice machine hanging around, they’d probably fire that up as well.
Be Friend-Friendly!!!! It makes no sense that Topgolf is successful. We’re talking about a driving range that caters—in large part, at least—to non-golfers. Or at least non-serious golfers. What’s next, a pool for non-swimmers? A car for non-drivers? A casino for non-gamblers? Hmmm. Let’s get back to that in a minute. For now, let’s deconstruct the appeal of Topgolf. Why is it so damn popular, especially in Las Vegas, where less than a mile away, a real driving range for real golfers couldn’t wrangle enough business to stay open? Why, indeed? Socializing, that’s why. It’s the perfect place to hang with your friends. There’s food and drink and music. There’s plenty of space to lounge around and shoot the breeze. There’s even a swimming pool. Sure, the main organizing principle is indeed golf, but you don’t actually have to partake to have fun. You can simply sit there, sip there, dip there, and watch others smack the ball around. Our business must do the same. Create a gaming environment that is, to borrow some prison parlance, less solitary confinement and more general population. New game types, areas that encourage non-gamblers to watch their friends play, a comfortable place to hang out, perhaps even food and drink service on the gaming floor. The main organizing principle will continue to be gambling; however, new products and new ambiance will broaden the appeal to the folks that otherwise wouldn’t give two cents about a penny slot machine. All of this, of course, is not a hard and fast prescription. Not everything will work according to plan, or more aptly for gaming, according to Hoyle. Experimentation is the key. Suppliers and operators need to shake the tree and see what falls off. Could be nothing, but it could be something, something big, something that changes the course of history. And if it’s an apple, let Newton know. It may give him an idea. Roger Snow is a senior vice president with Scientific Games. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Scientific Games Corporation or its affiliates.
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Presented by
Operators Vs. Manufacturers: Making Peace MARCH 21, 2019
At this session, operators and manufactures will sit down and discuss vital issues for casinos: the changing casino floor and new technology, the innovation of new games and systems, and the regulatory stranglehold in some jurisdictions. Also participating in this Episode will be executives who have worked on both sides of the fence. PROPOSED SCHEDULE:
9:00 – 9:30 A.M. Setting the Stage: Walking the Walk
At this session, David Patent, CEO at VizExplorer—who has worked for operators and suppliers— talks about how more communication and discussion is needed between the parties to create an exceptional customer experience.
9:30 – 11:00 A.M. The Great Debate: Creating the Extraordinary Gaming Experience
Slot manufacturers are constantly coming up with inventive themes and great game play. Operators are captivated by those games, but reticent about the costs. What can be done to give players an entertaining experience with more time on device and at the same time allow operators to recoup the cost of the machine in a reasonable time period?
11:15 A.M. -12:15 P.M. The Future Is Now: New Technology That Will Rock the Floor
New technology will usher in a new look for the casino floor. Artificial intelligence, data analytics, skill games, blockchain and cryptocurrency, mobile gaming and sports betting will all contribute to a vastly different look for the casinos of the future. UNLV Gaming & Hospitality Education Series Sponsors
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Farewell to Cash
Suppliers provide technolog to ready thy e industry for cashle paymentsss By Dave B
ontempo
S
o much for “What’s in your Wallet?”—the commercial pitch coaxing consumers to buy a credit card. The modern phrase might be “What is your wallet?” And there may be no card. Soaring mobile-phone usage, coupled with demand for gaming funds access, drives a rising cashless sector. Phones using digital wallets link consumers and casinos on unprecedented levels. Patrons buying products using the device that stores loyalty card information and digital coupons form a growing industry niche. The dynamic mirrors other industries. Think of the Starbucks app or the mobile-phone tap enabling passengers to bypass the boarding-pass printout. Or Google’s Wallet service enabling users to “store” cash on their phones and spend it in-store, online or at businesses accepting Google payments. Gaming has, for good reason, arrived late to this party. Strict industry oversight and different jurisdictional regulations make the process more deliberate. Problem gambling in this multibillion-dollar environment is a legitimate concern. One can see a future slogan of “bet with your app, not over it.” Yet, major vendors see a profitable big picture. Gaming revenues are projected to surpass $500 billion, roughly $75 billion from online play, within the next five years. Cashless will be among the boats lifted by the rising tide.
The Next Trend This realm may soon fill the space predicted by industry officials. As far back as 2010, the former Bally Technologies issued cashless devices like cards in places like South Africa, according to Ted Keenan, vice president of product management for Scientific Games, which eventually acquired Bally Technologies. Cashless may have been ahead of its time then. But fast forward a decade, and companies need to be ahead of that curve now. Keenan sees a surge in the cashless sector amid an array of outlets. The 56
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Scientific Games portfolio includes instant and draw-based lottery games, electronic gaming machines, server-based lottery and gaming systems, sports betting technology and social, mobile and interactive content. “The growth in the cashless space could be similar to that with the TITO revolution from, say, 2000,” he says. “In the consumer world, we see numbers indicating that 12 percent of customers name cash as their preferred payments, but here in the casino world, the large majority of customers still use cash. Something is out of line. We really think there is going to be a fast change to these cashless solutions. “The way we look at this, we have to be ready for that shift to happen. There’s been a long, slow run up to this point, but it appears we are about to have the mass market say, ‘Hmm, this is a good idea.’ That’s exciting to us.” If industry estimates of 25-35 percent of casino patrons adopting cashless and cardless systems by next year occur, that opens a sizable potential revenue stream for operators. Las Vegas-based Scientific Games addresses the market with Unified Wallet, slated for early deployment to a couple of properties in the first quarter of this year. The product will be tested, evaluated, tweaked and perhaps eventually rolled out to the mass market by the end of 2019. It is a software
“From your mobile phone, you are able to fund your gaming wallet, put money onto slot machines, (buy chips at a) table game, buy a buffet ticket or do whatever you want.” —Ted Keenan, Vice President of Product Management, Scientific Games
Ava
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Everi’s CashClub Wallet
solution available for properties, which can help them customize offers and drive brand loyalty. Ultimately, it can be used for a spectrum of activity including social gaming, electronic games, sports betting, lottery, table games and retail purchases. The Unified Wallet enables players to show the phone at a game site, deduct money from the wallet and join the action. “Unified Wallet offers a consolidated view of your casino funds along with access to your external sources,” Keenan indicates. “From your mobile phone, you are able to fund your gaming wallet, put money onto slot machines, (buy chips at a) table game, buy a buffet ticket or do whatever you want.” Keenan makes an observation regarding stored funds. Consider this product’s contrast to the classic wallet in one’s back pocket. If a player leaves the property with cash, the funds are blended with other money and will likely be used outside the brick-and-mortar property. But a wallet on the phone may loom like a marker, something to tap when needed. It may stay confined to gaming. “We have seen that when a player leaves the property with some money in the wallet, that player will continue to use the (same) cash over and over,” Keenan says. “If you have money left in the wallet, you are much more likely
to play again with that property, even if it’s only $10. You will even re-fund the wallet. “Ultimately, where we are moving to is some consolidated account for the convenience of the players. They don’t want to carry a physical card, they don’t want to visit an ATM before going to the casinos, they don’t want lines. “None of this is earth-shattering technology; various other industries use it,” he adds, “but the question is, how do we package it all up in ways that are convenient for the player and the operator to use?”
Walking a New Road Everi Holdings, based just outside the Las Vegas Strip, is known for innovative funds access products helping players manage funds for casino floor use. In 2019, it embarks on a cashless quest to entice operators. The company’s blueprint includes test programs for its CashClub Wallet at two large casino properties, according to Darren Simmons, FinTech business leader at Everi. “The wealth of development in our digital wallet has enabled us to address the diverse needs of operators and demonstrate to them how we can help their patrons seamlessly move financial value across the gaming ecosystem,” Simmons says. “We believe we’ll continue to see more operators adopt the technol-
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ogy, but it will require longer implementation cycles since it impacts the entire organization.” Some players will always prefer using cash, but a growing number want their financial snapshot on a tablet, or phone. CashClub Wallet meets an important industry need, Simmons asserts. It is a sophisticated, interactive wallet that consolidates payment options for players when integrated with Everi’s CashClub software and full-service Xchange kiosks. “Cash in the casino isn’t going away anytime soon, but we have seen over the past 19 months an imperative for a digital transformation across the casino,” Simmons says. “The digital wallet is a key piece of this transformation, which is being driven by demand for self-service options from patrons, the convenience of accessing and managing funds via a smart phone, and consumer adoption that is already occurring in the retail space with the likes of Apple Wallet. “In gaming, we see the pivot to cashless as having both revolutionary and evolutionary components. The digital wallet is still a nascent technology with only a few implementations, but we believe serious penetration will occur within two to five years. Regulatory approval and operators’ ability to invest in new technology in order to introduce a digital wallet are two of the big obstacles.” The digital wallet is supported by more than 30 money-transmitter state licenses, a key asset for Everi, according to Simmons. “It gives us the ability to hold funds on account for payments and doesn’t require the patron to have to sign up for a prepaid card,” he indicates. “This is an FDIC-insured account we hold through our money-transmitter licenses. Our FinTech business is also connected to more than 840 casinos across the U.S. and Canada, which has been vetted and verified by both gaming and financial regulators.” According to Simmons, the digital wallet empowers patrons, giving them them a choice about personal funds not only on the gaming floor, but in nongaming outlets on property. The challenge for suppliers will be keeping the patron in mind when tailoring a digital payment system for an operator. “Patrons want to feel secure in what they’re doing, that the operator has taken into account their privacy, and that they have built in a loyalty component so they feel there is value in moving towards the digital transaction,” Simmons adds. “The digital wallet we offer also layers in the critical business functions of Know Your Customer (KYC), Anti-Money Laundering (AML) compliance, and money-transmitter licenses. This gives the operator tremendous flexibility and scalability across their enterprise.” As for its use, Simmons says some jurisdictions have embraced funding a digital wallet enabling patrons to access funds at a table game, sports book, or even a non-gaming outlet. Integration with the property’s casino management systems make this happen, effectively pushing funds down into the wagering accounts that patrons have access to. “While this is exciting, Everi is taking a deliberate approach with its digital wallet—a crawl, walk, run strategy,” he indicates. “We want to ensure we’re delivering a solution that creates a premium experience not only for the patron, but for the casino employee as well.”
Cashless, Cardless International Game Technology, the London-based global gaming-machine, lottery and research and development powerhouse, has long held a connection to cashless, and offers an array of products for it. IGT’s Cardless Connect technology enables patrons to use their smart phones for varied purposes like initiating a patron loyalty session at a slot machine or transferring funds to and from a slot machine. With the addition of Resort Wallet to Cardless Connect technology, users can seamlessly initiate funds transfers between multiple casino properties owned by a single operator, 58
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IGT’s Cardless Connect
officials say. With Cardless Connect, a player sits down and points a phone at the gaming machine. The player display shows the player’s name and point balance. When the player leaves, the app automatically cards him or her out. The Cardless Connect software enables players to card in to an eletronic gaming machine without a physical card, removing a common barrier to play and retaining younger and tech-savvy players. Paper tickets also become obsolete with this product. Where approved, players can transfer credits with just a few taps on their phone because of IGT’s proven EZ Pay software. Cardless Connect integrates into a property’s app, driving use and keeping a casino’s brand front and center. Touted benefits include increasing the use of a property’s mobile app and carded play club membership while reducing printing costs. It runs on Apple and Android devices. IGT Casinolink Wallet offers an account-based wagering solution. It enables players to transfer funds using their players club card, which can be accessed at any connected slot machine across a property or enterprise. With multi-site, multi-language and multi-currency support, Casinolink Wallet is a scalable business solution that can be configured to meet a property’s unique needs, officials say. Resort Wallet provides an essential benefit within linked properties Currently, players can only use funds, whether in a paper ticket form or a cashless balance, at the casino where they originally played. This creates friction when guests want to use funds at another casino within the same enterprise. According to IGT, Resort Wallet removes this friction by allowing guests to use funds from other casinos within the enterprise when their host balance runs out. The wallet also communicates with third-party gaming apps to share wallets. Players can keep slot, sport and online balances in the same wallet. This keeps finances organized. Touted benefits include the increased velocity of money, optional mobile integration and reporting. Across the gaming spectrum, properties await approvals to allow more types of funding, hoping precision comes after permission. There will always be a place for several payment routes. Some patrons prefer privacy, wielding cash to fund play when they wish to engage. This option is quick, private and safe, encouraging a gambler to wager within one’s means. It also provides a timely speed bump to to slow impulsive ATM withdrawals. Others want tech-savvy access. And yesterday won’t be soon enough. They can view, access and spend money in real time, mirroring the pace of life outside this industry. Gamblers in this group prefer quick decisions, instant funds deployment and convenience at lightning speed. Somewhere in between is the loyalty card, acting like a credit card. Patrons use the card in their physical wallet, but can utilize it for both gaming and non-gaming spend. As innovations continue, operators will continue offering cash and cashless options for customers. There is enough room in the gaming world for both of them.
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EMERGING LEADERS Natural Leadership Keith Kruczynski Director of Game Development, Gaming Arts, LLC eith Kruczynski majored in computer science at Siena College in Loudonville, New York. Not an unexpected major for a game developer. But it was the certificate in theater that played a role in his hiring at Bally Technologies, Inc. in 2004, says Kruczynski, now director of game development for Gaming Arts. “It was probably the best decision I made in my education,” says Kruczynski, from Valley Stream, Long Island. “During my first few months at Bally, I found out that the main reason my resume was picked out of hundreds of candidates was because I had that certificate. They were looking for engineers with a creative side.” Kruczynski spent 12 years with Bally, a period in which Scientific Games acquired the company. “I honestly can’t think of a better job. We got to make games for a living.” The first game he worked on was “Saturday Night Live’s Blues Brothers.” “I also worked with ‘Playboy,’ ‘Cheers’ and ‘Wheel of Fortune,’” says Kruczynski, who relaxes on the golf course and takes side trips to Disneyland with wife Lauren and daughter Brooklyn. While he mastered game development, Kruczynski faced obstacles finding his managerial style. “I tried to mimic the style of the managers I worked for, but failed miserably. I wasn’t comfortable being a leader until I realized I just had to be myself and do what felt natural,” he says. At every step of the way, he had people offering guidance, starting with his parents, Robert and Margaret Kruczynski. “They sacrificed a lot and worked hard to help get me where I am.” On a professional level, Kruczynski mentored with some of the best game developers from Bally and Scientific Games: David Schultz, John Vallejo and Mike Mitchell. “When it comes to leadership and building good business relationships, I’ve always admired my father-in-law, Tom O’Brien, and Gavin Isaacs, COO at Bally and then CEO at Scientific Games. You wouldn’t expect to see someone at that level of management around the game development area.” These days, Kruczynski cites Gaming Arts exec-
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Personal ROI Tonya Roedell Director of Strategic Initiatives, Aristocrat Technologies
“I wasn’t comfortable being a leader until I realized I just had to be myself and do what felt natural.” utives Mike Dreitzer, Jean Venneman and David Colvin. As Gaming Arts president, Dreitzer makes it a priority to put developers in front of customers. “It gives the entire organization a sense of ownership and pride in our games,” he says. For the foreseeable future, the fundamentals of successful slot games will remain the same. A fun and exciting experience wrapped up in attractive art, animation and sound will never go out of style, he says. However, the medium in which it is presented to the player is the big question. Kruczynski believes sports betting will drive innovation in non-slot-style games and across the casino floor. But not game development. “Historically, sports-themed slot machines have rarely been successful,” he says. “Most licensed games have a direct correlation to a fun bonus or game mechanic that lends itself to winning money. Sports themes don’t really have that natural progression.” Kruczynski’s own career provides lessons for those interested in the industry. “Don’t be one note. If you’re an engineer, learn about art, animation and sound. If you’re an artist or animator, show interest in engineering.” — William Sokolic
onya Roedell grew up in Mooreland, Oklahoma, a farm town of 1,200. She ended up in the teeming metropolis of Las Vegas, first with Caesars Entertainment and now with Aristocrat Technologies, where she serves as director of strategic initiatives. “I had to stop believing how others defined me,” she says. “I’m not too young, it isn’t a man’s job, growing up in a small town won’t hold me back, and I refuse to fail. I learned to be curious, persistent and resilient.” The journey began when Roedell graduated from Northwestern Oklahoma State University with a degree in eCommerce in 2002. Then she visited Las Vegas for the Comdex trade show. “I knew that marketing in the gaming industry was the place to be,” she says. In 2003, Caesars Entertainment hired Roedell as an internet marketing specialist, managing the Eastern region. The company promoted her to internet marketing manager, responsible for all properties and the Total Rewards program from an interactive perspective. After eight years, Roedell moved to Aristocrat, which created a position to utilize her operations knowledge. “The experience with Caesars was instrumental to my success with Aristocrat,” Roedell says. “I gained the ground knowledge needed to understand the gaming industry and worked with world-class marketers. I understood how loyalty is created and how to drive revenue to all sectors, including non-gaming.” At Aristocrat, Roedell provides executive oversight of a property systems partnership,
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managing the customer relationship. “Working with all levels of operations, from VPs to end users, gaming floors to F&B, I make system conversions as painless as possible,” she says. “My team and I build deeper loyalty with our customers through increasing product usage and ROI.” Success did not come without Roedell facing her fears. “Life won’t always go the way you want it to, but when it comes down to it, we all have the same number of hours in the day. I learned to make my time count. Instead of complaining about the way things could/should have been, I focus on everything I’m grateful for.” Roedell has benefited from a variety of mentors. “Global Gaming Women has played a major role in my ability to network and to find likeminded individuals that have (guided) my development and success,” she explains. Along the way, Roedell’s mentors have become good friends and provided honest input in a constructive way. They’ve assisted in big decisions from changing companies to navigating day-today situations. Former Caesars leader Katrina Lane encouraged Roedell to apply for a management position at the company. As vice president, Lane ensured that she had a seat at the table with decision-makers and provided strategies to have Roedell’s voice heard. Lane moved on to become an executive at American Express, but continues mentoring her. As for the future, Roedell sees digital technology as pivotal. “Mobile phones will continue to play a major role in our lives personally and professionally. Sports betting approvals are only the beginning to what will soon come,” she says. The future is also open to new ideas and new talent, says Roedell, who likes to relax at the beach or in the mountains, often surrounded with music. “Network, keep options open and never burn a bridge,” she advises. “It’s a small industry, and everyone is connected in some way. Invest in yourself, understand your strengths and weaknesses, and don’t forget to have fun; the gaming industry is in the business of fun.” —William Sokolic
“In addition to continuing to grow our brick-and-mortar businesses, it seems very likely that we’re going to enter the mobile/digital marketplace with our casino products in the future.”
Guests and Gaming Adam Suliman Vice President of Online Gaming, JACK Entertainment dam Suliman, vice president of online gaming at JACK Entertainment, could not have anticipated a career in gaming. Entering the industry shortly after commercial casinos were approved in Ohio, he made the transition to casinos from Quicken Loans, whose principals founded the company JACK Entertainment, formerly known as Rock Gaming LLC. He now finds himself in the most exciting and expansive area of the gaming industry today. Suliman’s gaming industry experience is literally from the ground up. With a degree in finance from Eastern Michigan University, he worked his way through business consulting roles at Quicken for six years before turning to gaming in 2010. Since becoming involved with JACK, Suliman had been in project management and operations roles before becoming vice president of ancillary gaming and innovation. In that role, Suliman handled iGaming, innovation, racing and internal process improvements. Since transitioning to gaming, Suliman has been impressed with the pace of the industry and particularly interested in its guests. He is surrounded by like-minded professionals at JACK who believe there is room for tremendous improvement in the guest experience, stating, “We tend to focus on what we can do for the guest, and how we can make our properties and product just a little better. Ultimately, we believe that the numbers, revenue and accolades will follow.” Suliman elaborates, “We’ve been willing to invest significant time and energy into developing products that simply make the experience at our properties better in the guest’s eyes.” Suliman does not attribute his professional success to a single mentor or individual. He considers himself fortunate to have interacted with multiple uniquely talented professionals at JACK who rely heavily on one another for input and insights as the business has developed. This culture at JACK has fostered great success for the company in a relatively limited period and has positioned the company to take advantage of its handle on technology just as innovation has overtaken the future of the industry. As for the future of gaming, Suliman believes that regional business will continue to evolve into a more experiential entertainment business that also just so happens to offer casino gaming, noting, “We’re going to continue to focus on removing friction points for our guests in order to make it easy for them to enjoy our properties. In addition to continuing to grow our brick-and-mortar businesses, it seems very likely that we’re going to enter the mobile/digital marketplace with our casino products in the future. The winners in that space are going to be the ones who can produce differentiated gaming experiences online.” Not surprisingly, Suliman describes himself as a “process guy” who loves technologies that help people get what they want faster, with less friction. He spends a lot of time reading about how technology is being used in other industries. — Michael Soll, President, The Innovation Group
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Discounts on Loss An epidemic thatbility threatens the via ons of casino operati By Jim Kilby
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iscounts on loss, while once rarely used and then only to encourage faster pay on credit losses, have become the marketing tool of choice to attract the premium player. The use of the tool has grown exponentially in the last 30 years. Now, virtually every major U.S. casino that targets premium customers from Connecticut to Las Vegas, Las Vegas to Monaco, Atlantic City to the Caribbean, routinely offers players discounts on their losses. Unfortunately, few casinos know the true cost of discounts, or how to style a program properly so as to maintain an acceptable profit margin. This lack of knowledge results in programs where the players actually have an advantage over the casino, or such a small disadvantage that the volatility of wins/losses does not justify this miniscule edge. This misuse of player discounts is an existential threat to the profit margins once realized from the premium player. It’s not uncommon for casino marketing executives to give the premium player a rule modification, as an enticement, that decreases the casino’s advantage. They consider it a “volume discount.” For example, a casino with double-zero roulette wheels may offer the player a single-zero game by simply calling a double-zero spin a no spin. This modification reduces the game’s advantage from 5.26 percent to 2.7 percent—effectively earning the same from a $1,000-per-spin single-zero player as a $5,133-per-spin double-zero wheel player.
Rolling Along In Asia, the premium players are offered the “rolling program” whereby management controls how much of the game’s advantage they are returning in the form of a rolling premium. Casinos can offer the baccarat bettor a 4 percent commission on banker bets instead of the customary 5 percent, which de62
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creases the casino’s advantage by about 50 percent. The one thing the above-mentioned rule modifications have in common is that the casino knows how much they are returning to the player in casino advantage as a result of the modification. With discounts, management has little or no idea how the discount offered affects the game’s edge over the bettor. Granted, a 15 percent discount on loss sure sounds like a 15 percent cost. Not so. Executives often say that they like discounts because they only give the discount when the player loses. That belief is part of the problem. A discount-on-loss player receives the benefit of the discount regardless of winning or losing. For example, what if during a play session in the above roulette example, the ball never dropped in the double-zero pocket? Would you think the casino’s advantage must have been earning at the double zero rate since the double zero never came into play? No, because every spin “it could have.” The same with discounts on losses—the bettor is playing with a decreased game disadvantage or even an advantage. The player benefits from the discount even when he wins because he “could” have lost. Consequently, he is playing a decreased disadvantage game. How much? That disadvantage is controlled by the player, not the casino. When a bettor plays a specific number of hands comprised of various bet sizes, there is a multitude of possible outcomes. The player can lose a little or lose a lot and all the outcomes in between. The average of all these possible outcomes is the same value as the theoretical casino win. With discounts, only the losing trips are discounted by some arbitrary percentage. Consequently, the game has a new average and therefore a new theoretical casino win. Just decreasing the losing trips by, as an example, 15 percent, does not decrease the average by 15 percent. Compare two $500 bettors.
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One bets $500 every hand for 1,000 hands while the other bets 500 hands at $1 and 500 hands at $999. Both have the same average bet and same theoretical win but the second bettor has huge wins and losses. The discount only decreases the losing trips and, consequently, the second bettor’s reduction in the game’s disadvantage is much greater than the flat bettor’s cost.
Edge Reduction In the July 10, 2011 issue of Press of Atlantic City, Don Johnson reveals how he won $15 million playing the “discount on loss” in Atlantic City casinos. He is quoted as saying, “It’s a huge edge. I just think somebody (at the casinos) missed the math when they did the numbers on it.” He was wrong about missing the math; the casinos never did the numbers on it. Nothing confuses casino marketers more than a product with two revenue figures: the amount the casino was supposed to win (called the theoretical) and the amount the casino did win (or lose) called the actual. Executives even go so far as to refer to player losses as the casino “beating him/her.” With discounts, the casino marketer only focuses on what the player loses, whereas, the theoretical win is what the casino will ultimately retain. Magician’s tricks are dependent upon misdirection. That is, focusing the audience to look at something else. With discounts, the casino marketer depends on management looking at the player loss instead of what actually matters: the theoretical win after the discount. Casino marketers believe—falsely—that whatever a player lost is theirs to keep. However, if the casino won more than the theoretical advantage, the overages are simply being held in escrow for the same or another player to win. The same when a player wins; that player or someone in the public will balance the game’s books. Regardless of how you manage a game, if the advantage is 5.26 percent over the player as in roulette, the long run win will approximate the theoretical win. Management cannot control wins or losses, but they can influence the theoretical win, that’s all. In this age of discounts, math has been
For more information or to subscribe to the database or monthly report contact Ashley Diem at ADiem@FantiniResearch.com or call +1-302-730-3793 - www.FantiniResearch.com MARCH 2019 www.ggbmagazine.com
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Executives often say that they like discounts because they only give the discount when the player loses. That belief is part of the problem. A discounton-loss player receives the benefit of the discount regardless of winning or losing.
thrown out the window. In this new bizarre world, what we offer the player is driven by what our competitors offer the player: math be damned. The casino has no idea of how the deal affects the casino advantage. Basically, the discount bettor is in control of what his disadvantage is. The casino often installs hurdles in the hopes of earning something. For instance, requiring 12 hours of play before receiving the discount. However, casino hosts will argue with senior management that the player experienced a “quick loss” and should receive the promised discount. Their justification, “that’s what the other casinos do.” The tail is now wagging the dog. The combination of total hands played, the volatility of betting, the discount percentage, and the amount lost determine the discount’s reduction in casino advantage against the player. With discounts, the amount of the decrease is controlled by the player, not the casino. Premium players are often represented by agents who negotiate the “deal” and, unfortunately for management, know more about the mathematics of the game than the casino executive. A knowledgeable agent combined with a naïve marketing executive only spells disaster regardless of what the other casinos are offering.
Doing the Numbers Every casino has a management system that attempts to calculate the theoretical win per player. Some casinos will use the system-calculated theoretical win and decrease it by the amount of discount returned in the belief that this is a true representation of the player’s after-discount profitability. This approach is useless, other than providing false assurance that a player is more profitable than he is. The bettor has decreased his theoretical disadvantage by his betting volatility and total hands played. By how much, they don’t know. Objective discount programs can be developed whereby the casino has some control over the game’s advantage against discount players. However, it requires a different mindset, control and bet tracking. Unfortunately, casinos will do what they have always done; they will mimic or better their competitor’s deals. When casino marketers only offered modifications with known casino advantages, this was plausible. With discounts, it’s not. Can anyone imagine a car salesman who does not know how much is the lowest he can accept for the auto? With discounts, it’s based on what the competition is offering. If casinos drew a line in the sand and said, “We will not offer any deal better 64
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than break-even for the discount player,” they would actually be improving their bottom line. Many of today’s casino executives believe the math only gets in the way. Several years ago, the old Sahara decided to offer baccarat with no commission. Same game but no commission. With this modification, the banker bettor had the same advantage with their banker bets as the casino had against the player bets. That is, instead of banker 1.06 percent disadvantage, the bettors had a 1.24 percent advantage. This was not done as a promotion, this was done out of ignorance. In the short run, the casino manager actually believed his idea was working. Needless to say, it didn’t take long for the smart players to capitalize on management’s foolishness. This is akin to paying 38-to-1 in roulette with only 38 possibilities. In the short run the casino can easily have winning days but, in the long run, the mathematics will prove the game is a loser to the casino. If the players set out to create a program that thoroughly confused casino marketing, they would have invented the discount on loss. They didn’t have to; casino marketing did it all by itself. Now, casino marketing executives’ careers are built on the use of the discount. Executives who advocated these programs must now defend the programs because their credibility depends upon it. To further complicate things, Wall Street often monitors a casino’s win per unit. The discount on loss is hidden in the financials. Consequently, if management identifies a losing program and adjusts it so that the non-profitable program results in more overall profit but less win, the win per unit decreases. Discounts on loss have grown to epidemic proportions and will continue to grow unless and until management sees that math governs the game: not how much the player lost. From the days of Bugsy Siegel until the late 1980s, the casinos generally knew their approximate edge over the player. With discounts, that edge is unknown, and that lack of knowledge and understanding is a threat to that once-cherished segment called the premium player. Jim Kilby, the former Boyd Professor of Gaming at University of Nevada, Las Vegas, has over 45 years experience in casino operations. He has held operations positions from dealer to VP of casino operations and consulted to casinos across the globe. He is co-author of Casino Operations Management (Wiley), Introduction to Casino Operations, and Principles of Casino Marketing. He can be reached at JimKilby@usa.net.
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NEW GAME REVIEW by Frank Legato
Clinko Winning Wall Incredible Technologies
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his is the first entry in the game show-themed Clinko series of video slots on the V55 cabinet, featuring a pachinko-style mystery bonus feature played out on the 55-inch flat-screen top
Manufacturer: Incredible Technologies Platform: V55 Format: Five-reel, 30-line video slot Denomination: .01, .02, .05, .10, .25 Max Bet: 300 Top Award: Progressive; Resets at $2,500 Hit Frequency: Approximately 50% Theoretical Hold: 5.92%-14.92%
monitor. The base game in Clinko Winning Wall is a five-reel, 30-line video slot. The main bonus event is the Clinko feature. When triggered randomly, it transforms the 55-inch flat LCD display into a colorful pachinko board with pegs displaying different awards. The ball bounces from peg to peg as it falls from the top of the screen down to the reels, awarding the prizes the ball touches on the way down—including credit amounts, added wilds, symbol upgrades or a line-win multiplier. Two scattered bonus symbols trigger a free-spin event in which two Clinko balls are released before every spin, adding to the awards touched along the way. During free spins, there are jackpot pegs added to the board, corresponding to three progressive jackpots at the top of the big screen—a Minor prize resetting at $40, a Major prize resetting at $200, or the top Grand, resetting at $2,500.
Jin Ji Bao Xi: Rising Fortunes Scientific Games
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his slot, on the new TwinStar Wave XL cabinet, is the latest entry in the Jin Ji Bao Xi series of games showcasing beautiful Asian imagery and volatile game features. Rising Fortunes features a five-reel, 243-ways-to-win base game with a two-level external progressive. Top jackpot amounts reset at $2,000 times the denomination for the Major and $20,000 times the denomination for the top Grand prize. Available denominations range from a penny version all the way to $100. The progressives are won through a Jackpot Bonus event, which can be triggered randomly on any base game spin containing one or more wild symbols. A field of 12 gold coin symbols appears, and the player is prompted to pick to reveal Mini Bonus ($15), Minor Bonus ($500), Treasure Major or Fortune Grand symbols. The player picks until matching three symbols to win. During base game play, six or more scattered Red Gong symbols trigger a Feature Selection screen, awarding the sum of the values displayed on the symbols. If at least one position does not contain a Red Gong symbols, the player picks between the Top Up Bonus and the Free Game Bonus. If all positions are filled, the player is awarded the Minor Bonus plus Free Games Bonus if playing less than 36 credits, or the Fortune Grand Jackpot plus Free Games Bonus if playing 36 credits or more. The Top Up Bonus awards six spins. All Red Gong symbols triggered at the start of the feature will be held in place during the bonus.
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All remaining positions will continue to spin, and possibly land a Gold Gong or Green Gong symbol. Each Gong symbol landed during the bonus will award the respective value. The Free Games Bonus—triggered by 15 Gong symbols in the base game as well as during the Feature Selection—awards eight free spins. Three or more scattered Gong symbols on a spin awards and additional three free games. A random “Shou Bonus” during the free games awards the sum of all Gold Gong symbol values on the reels. Manufacturer: Scientific Games Platform: TwinStar Wave XL Format: Five-reel, 243-ways-towin video slot Denomination: .01 through 100.00 Max Bet: 880 Top Award: Progressive; Resets at $20,000 times denomination Hit Frequency: 36.29% Theoretical Hold: 4.08%-12.41%
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Mahjong Synergy Blue
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kill-based casino game specialist Synergy Blue is releasing this touchscreen video version of mahjong, the ancient Chinese tile game that maintains popularity throughout Asia. The game follows the basic mahjong standard of matching tiles, and the skill and strategy involved in matching correctly through the layout to clear the board. Matching tiles sends the player through several levels with rising bonuses, the main goal to beat the “Gold Room,” achieving the highest-level awards. Game play triggers bonus screens in which the player selects a treasure chest, a gong, urns, lanterns and koi fish statues to reveal prizes.
The game is available in the standard skillbased mahjong and a separate version based on chance. Games are available in English, Spanish, French, German and Chinese, both traditional and simplified. Manufacturer: Synergy Blue Platform: Modular VGM Format: Mahjong tile game Denomination: .01 Max Bet: 200 Top Award: 10,000 times maximum bet Theoretical Hold: 2.5%-12.5%
Rising Koi Konami Gaming
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his game is featured on Konami’s new Concerto Crescent curvedscreen cabinet (pictured), as well as the flat-screen Concerto Stack upright. Rising Koi is designed to take full advantage of the 43-inch vertical display on either cabinet. The three-by-five reel array is topped by a bonus screen displaying three columns of gold coins marked with credit amounts that rise to the top of the screen. The top coins award 2,500, 5,000 and the top jackpot of $1,000. Both the base 40-line game and the free games feature a Mystery Multiplier feature that randomly multiplies wins, and credit prizes during the main bonus. The main event is the Rising Koi Feature, in this game called Jewel Koi. Any one or more Koi or Koi 2X symbols in a randomly changing bonus area triggers the Rising Koi mode, in which Koi symbols rise from the main screen to randomly selected columns. Before the Rising Koi symbols move, the bonus prizes on the top screen are doubled for each Koi 2X symbol. Each credit amount reached on the top screen is added to an accumulating award. If the third column reaches the top coin displayed, the $1,000 jackpot is added to the accumulated amount. There also is a free-game bonus. Three, our or five jade symbols trigger eight, 12 or 20 free games, respectively. The number of bonus trigger symbols on the fifth reel is increased during the free games.
Manufacturer: Konami Gaming Platform: Concerto Format: Five-reel, 40-line video slot Denomination: .01 through 5.00 Max Bet: 100, 150, 200 Top Award: $2,210 Hit Frequency: 31% Theoretical Hold: 4%-18%
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FRANKLY SPEAKING by Frank Legato
Dumb Crooks, Mahjong and Ecstasy
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Yep, took a nice chomp out of the officer’s wrist. Left a mark. Drew blood. No gun was found in the bag. News items on the incident did not reveal what was, in fact, in the bag. Maybe the guy was hungry, and was reaching in the bag for a sandwich. Maybe he was so hungry, when the guard took away his sandwich, he bit the closest meat, which was the security official’s arm. We’ll look into that for you. Meanwhile, the security manager was treated at the scene. The biter was transported to Niagara Falls Police Headquarters, where he was checked for rabies and put to sleep. Finally, police in Malaysia arrested a group of senior citizens who had started a makeshift casino in back of a shop-lot hotel, consisting of mahjong games and lots of drugs. The perpetrators— mostly elderly, with the oldest at 79— were reportedly playing mahjong and getting high from a drug buffet including heroin, ecstasy and Erimin 5. At press time, they were being held under a police remand order pending gambling and drug charges. Gee, I hope they go easy on those old folks. Come on, who is getting hurt by 20 senior citizens kicking back for some gambling and partying? Why not let them have a good time, and eventually cruise off in style to the big mahjong parlor in the sky? They may, in fact, be acquitted. After all, there were no surveillance cameras around. And not one of those arrested had signed up for the player’s club. VIC TOR RINAL DO
T
his issue of Global Gaming Business (“Making Gaming Great Again”) includes our annual section focusing on casino security and surveillance. As is tradition, we will thus offer our annual episode of Casino Police Blotter. This year’s episode is titled “Idiots at the Gate.” In Ferndale, Washington, the garden spot of Whatcom County, a nefarious individual assaulted a woman in an attempted carjacking, threatening to shoot her in the parking lot of the Silver Reef Casino. Ferndale, I happen to know without even looking it up in Wikipedia, was settled in 1872, and subsequently named for the ferns that grew around the original school house. (Presumably, planted by a guy named Dale.) Whatcom County was named after the Lummi Indian word Xwot qom, meaning “noisy water.” (As in, “Hand me that watchcom there so I can fix this noisy pipe.”) But anyway, on the night in question, the woman had just opened her car door using a fob when this guy grabbed her and demanded the keys, threatening to shoot her with a gun he said was in his pocket. She screamed and managed to pull away, running into the casino for help. The entire sequence was caught on video by parking lot surveillance cameras. Soon after that, Jesse Arthur Grooms was in custody on a Whatcom County warrant for robbery. Police had no trouble finding him, because get this: Before going out to the parking lot to jack a car, Grooms signed up for a player’s club card. There was, of course, surveillance video of that, too. The victim easily identified the man. A cocker spaniel could have identified him. He was wearing the same clothing as during the attack, signing up for the club with his ID. Police now had his name and address, not to mention his birthday, favorite drink, player’s club point balance, and whether he preferred a smoking or non-smoking room. You know, if there is a “Carjacker’s Handbook” somewhere on the internet (Jacking for Dummies, maybe?), I’ll bet the first rule in there reads, “Do not leave your name, address and mobile phone number at the location where you intend to facilitate a carjacking.” I guess the guy never read the handbook. But at least he didn’t bite the police officers who came to arrest him. A casino security official in Niagara Falls wasn’t so lucky. One day last month, a man was banned from New York’s Seneca Niagara Casino for some sort of slovenly prior behavior (news reports didn’t say what). A security manager spotted him in the casino after he had been kicked out, and moved to escort the gentleman toward the door. Allegedly, the man reached inside a bag to grab something, and when the security manager grabbed his arm to stop him, he bit the guard like a Rottweiler. (It’s Canine Simile and Metaphor Day, by the way.)
2019 SAVE THE DATE EDUCATION OCTOBER 14-17 EXPO HALL OCTOBER 15-17
SANDS EXPO, LAS VEGAS
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GOODS&SERVICES Corona Resort and Casino
ARISTOCRAT TOPS EILERSFANTINI REPORT
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ustralian slot manufacturer Aristocrat Leisure Limited (ALL) was the top fair share supplier for video reel, leased and widearea progressive slots in December, according to the monthly Eilers-Fantini Game Performance Report. Aristocrat’s Lightning Link and Dragon Link combined for more than 25 percent of theoretical net win in the Game Performance Database’s premium slot segment. AGS also fared well in the December report. AGS’ percentage of top performing games continued to rise, with recently released Eastern Dragon on the Orion Slant cabinet moving into the top 10 low-denomination owned video reel games and indexing at 2.24 times house average. Overall, AGS’ games are indexing at 1.55 times house average, the report said. IGT’s video reel games are indexing high and its wide-area progressives are indexing at 1.78 times house average. Other highlights: • Of the owned, low-denomination video reel games, IGT’s Scarab and Ocean Magic Grand, Scientific Games’ Dancing Drums and Lock it Link-Piggy Bankin’ and Aristocrat’s Wonder 4 Tall Fortunes hold the top five spots. • Aristocrat’s Dragon Link variants, Golden Century and Happy and Prosperous, remain at the top of the ranks of leased games. • Everi’s wide-area progressives indexed well at 1.25 times house average. • Incredible Technologies was the secondhighest indexing supplier in the owned segment at 1.2 times, only behind AGS. • Aruze’s three Fu Lai Cai themes on the Muso Triple 27 cabinet are tracking in the top 25 new reel video category, indexing near 1.5 times. Participation in the Eilers-Fantini survey has grown to 153 casinos covering 90,798 slots and 4,683 game themes.
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NOVOMATIC, AINSWORTH DOMINATE VIETNAM FLOOR
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he new Corona Resort and Casino on Phu Quoc, the largest island in Vietnam, selected Novomatic as its premium supplier to provide a range of gaming terminals, the casino management system and media technology across its casino floor. The first of three casinos to trial local play, Corona Casino opened this month and marks the first time that Vietnamese can enter casinos in their country. Austria’s Novomatic AG and Ainsworth Game Technology, the Australian slot manufacturer of which Novomatic is the majority shareholder, represent some 35 percent of the entire slot floor, with a total of 200 slot machines and 125 electronic table games terminals. Featuring a variety of cutting-edge solutions, the Novomatic and Ainsworth slot machines include an assortment of popular and market-attuned content, with a selection of leading multi-game mixes and games, designed to appeal to tourists and local players alike. A large Novomatic electronic table games stadium acts as the centerpiece of the casino. Based on the Novo Line Novo Unity II platform, the ETG area consists of 125 gaming positions, featuring the sleek Executive SL 1.24 terminals. The setup offers players the option of baccarat, roulette or sic-bo. The casino houses a total of 1,000 slot machines from a range of manufacturers, all managed by the Octavian myACP casino management system. The luxurious venue also includes 100 gaming tables, offering eight types of games such as baccarat, roulette, blackjack, sic-bo and several forms of poker, as well as VIP facilities, a private sky casino and three restaurants.
CONTINENT 8, PLAYTECH, SBTECH SIGN PARTNERSHIP AGREEMENTS
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ontinent 8 last month reached separate agreements with two suppliers—SBTech and Playtech—that will increase the company’s influence in many parts of the world. Mutual growth through partnership is being celebrated by Continent 8 Technologies and Playtech following the signing of a global partnership agreement at the industry’s annual ICE exhibition in London. This agreement builds on a highly successful relationship spanning over 20 years in which the companies have partnered to spearhead global expansion initiatives and collaborated to deliver world-class infrastructure and software solutions into global regulated markets. Signed February 5 at ICE London 2019 by Mor Weizer, CEO/executive director of Playtech and Michael Tobin, CEO and co-founder of Continent 8, the multi-year agreement continues the 20-year partnership between the global leaders and
Officials with Continent 8 and Playtech signed a partnership agreement at last month’s ICE trade show in London
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Roy Student Named ICE North America Ambassador delivers a platform for further expansion into emerging markets in 2019 across Europe, Asia and the Americas. To support the industry, the partnership will see an increasing number of mutual customers and operators benefiting from an integrated solution designed specifically for iGaming. In recent years, Continent 8 has supported Playtech’s acquisition campaign by ensuring that technology alignment and integration are simplified to ease transition and integration activities. A day earlier, sports betting and iGames supplier SBTech secured multiple top-tier domestic partners in both online and on-property sports betting in the nascent U.S. sports betting market. Supporting this unprecedented growth, SBTech continues to entrust Continent 8 Technologies as its global data center and connectivity provider. In 2018, Continent 8’s U.S. multi-state capacities increased to include Mississippi, Nevada, New Jersey, Pennsylvania and West Virginia, with upcoming locations in New York and Ohio. Continent 8’s seamless suite of hosting, security and network managed services is primed for those immediately entering the sports betting market in the U.S. and planning further growth as the landscape evolves.
MERKUR, SPINTEC FORM TECHNOLOGY PARTNERSHIP
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erkur Gaming and Spintec Gaming Technology are breaking new ground together within the scope of a technology partnership. The collaboration between Merkur Gaming and the Slovenian provider of electronic table games came into effect in January of this year. The technology partnership enables Merkur Gaming to market Spintec’s innovative and high-
C
larion Gaming, producer of the ICE Totally Gaming series of international trade shows, announced at last week’s ICE London show that Las Vegas-based gaming analyst and industry veteran Roy Student has been named brand ambassador for ICE North America, the first U.S. installation of the event, scheduled for May 13-15 in Boston. Student is president of gaming consultancy Applied Management Strategies in Las Vegas, a company he founded in 1986. His more than four decades of gaming industry experience includes serving as president of Cyberview Technology and pioneering systems company Gaming Systems International. He serves on the advisory boards of the Mob Museum, MarsWorld, Global Gaming Business magazine and CDC Gaming Reports. In his new role, Student will advise Clarion on its stakeholder engagement program in anticipation of the first ICE North America event.
quality products in the familiar Merkur design in selected countries. The product portfolio includes stand-alone solutions, compact gaming solutions and amphitheater gaming solutions. The games on offer range from sic bo and craps to roulette and baccarat, and are available in automated, virtual and live versions. “We are delighted to have Spintec, a worldrenowned and established developer, producer and provider of electronic table games, as our partner and are confident that this collaboration will be a great success for both Merkur Gaming and Spintec,” said Jürgen Stühmeyer, management board member for Merkur Sales.
SCI GAMES, PRINCESS HOLD ‘MONOPOLY CRUISE FOR CASH’
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cientific Games Corporation, in partnership with Carnival Corporation and Princess Cruises, announce the award of the grand prize of $100,000 in the “Monopoly Cruise for Cash” promotion. The winner, a VIP player from Holland Casinos, was one of more than 400 players in the grand finale slot tournament, which took place onboard Regal Princess in December. Another $100,000 in cash and free play in the ship’s casino was shared among the top 40 finalists. Celebrating a 20-year relationship with Hasbro and the Monopoly brand, Scientific Games collaborated with Carnival Corporation
and its premium line, Princess Cruises, to develop a nearly year-long promotion that included participants from more than 60 land-based, cruise and online casinos, along with winners from a local Las Vegas television station promotion. Select VIP players were awarded certificates for a free cruise and a seat in the Grand Finale $200,000 Monopoly Cruise for Cash slot tournament.
ARUZE ANNOUNCES CREDIT FACILITY
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lot manufacturer Aruze Gaming America and PDS Gaming LLC, a finance and lease company that specializes in customized financing solutions, entered into a multi-year revolving credit facility agreement, the proceeds from which Aruze will utilize for general operation purposes and towards its continued investment in the R&D and production of its gaming equipment. “PDS is a vital partner of Aruze,” said Rob Ziems, president of Aruze Gaming America. “We are excited to continue our relationship with them for years to come. This multi-year revolving credit facility enables us to strengthen our product offerings to customers for the foreseeable future.” Alex Dungan, CEO of PDS, commented, “We highly value our longstanding relationship with Aruze. Their new products are tremendous. We’re pleased to help finance their future growth and success in a creative, efficient manner.”
MARCH 2019 www.ggbmagazine.com
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PEOPLE MORGAN NAMED NEW NEVADA GAMING CHAIRWOMAN
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evada Governor Steve Sisolak in January apSandra Douglass pointed Sandra Douglass Morgan Morgan as chairwoman of the Nevada Gaming Control Board, replacing Becky Harris, who had been in the position for just one year after she replaced A.G. Burnett. Morgan was appointed for a four-year term from January 28, 2019 to January 28, 2023. Morgan was previously appointed to the Nevada Gaming Commission by then-Governor Brian Sandoval in April 2018. While serving as a commissioner, she was also the director of external affairs for AT&T Services, Inc. and was responsible for managing AT&T’s government and community affairs in Nevada. Morgan previously served as the city attorney for the city of North Las Vegas, and was the first African-American city attorney in the state of Nevada. Prior to her public service with the city, she served as litigation attorney for one of the world’s largest gaming companies. For the Nevada Gaming Control Board, she is the second woman chair and the first African-American.
EVERI SOLIDIFIES EXECUTIVE LEADERSHIP TEAM
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veri Holdings Inc. announced that its board of directors has extended the employment agreement of President and Chief Executive Officer Michael Rumbolz for an additional two Michael Rumbolz years through January 31, 2021. The extension supersedes Rumbolz’s prior employment term, which was to conclude in May 2019. Since his appointment as interim president and CEO in February 2016, and subsequently as president and CEO beginning May 2016, Rumbolz has overseen the implementation of a series of strategic operating initiatives that have resulted to date in nine consecutive quarters of year-over-year revenue and adjusted EBITDA growth, a return to profitability for the company, and a significantly improved capital structure. In addition, the company announced Darren
Simmons’ promotion to the position of executive vice president and FinTech business leader, where he will continue to lead Everi’s FinTech operations. Simmons served as Everi’s interim FinTech business leader during 2018, and under his leadership, the business segment is poised to achieve record operating performance for fiscal 2018. Simmons is responsible for managing the profitability of Everi’s FinTech business and continues to lead product management, product innovation, operations and sales support.
BELLE CORP.’S SY DIES AT 95
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ino-Filipino billionaire and Belle Corp. founder Henry Sy died January 19 at the age of 94. For the past 11 years, Sy was named the richHenry Sy est person in the Philippines by Forbes magazine, which estimated his net worth at US$19 billion. Belle Corp. is an investor in City of Dreams Manila, an integrated resort managed by a unit of Melco Resorts and Entertainment Ltd. Sy was born in China and moved to the Philippines at the age of 12. In 1958 he started his career as a Manila shoe seller and grew it into an empire encompassing retail, real estate and later, gaming. Belle Corp., originally a mining and oil company, added tourism and leisure property development interests in 1989, acquired Premium Leisure & Amusement Inc. in 2010 and in 2012 entered the gaming industry when it made a deal with Melco to develop and operate City of Dreams Manila.
RIVERS HIRES VACCARO TO OVERSEE SPORTS BOOK
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estern Pennsylvania native and renowned Las Vegas oddsmaker Jimmy Vaccaro has returned to his hometown as director of sports relations for Rivers Casino Pittsburgh. Vaccaro, a sports wagering luminary, Jimmy Vaccaro will advise and further develop Rivers Sportsbook, which opened at the casino in December. For many followers and fans of sports betting, Vaccaro is a household name. Most recently, he was director of sports marketing for South Point Hotel, Casino and Spa in Las Vegas, where he had been since 2013. He’s also a frequent expert commentator
on CNN, ESPN and social media on all matters of sports betting and oddsmaking. Vaccaro began his storied Las Vegas casino career in the 1970s as a blackjack dealer at the Royal Inn, where he became that property’s first sports book manager. In the nearly five decades that followed, Vaccaro held a series of sports book leadership roles with Mirage, MGM Grand, Golden Nugget and Barbary Coast, among others.
ELDORADO NAMES YUNKER TO TOP FINANCIAL POST
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eno-based Eldorado Resorts recently named Bret Yunker as chief financial officer, effective May 2. He replaces Thomas Reeg, who had served as Eldorado’s interim chief financial officer and was named chief executive officer on January 1. Most recently, Yunker served as managing director at J.P. Morgan Chase, with primary responsibility for the gaming industry. He worked with a wide array of gaming industry clients, including casino operators, gaming equipment suppliers, real estate investment trusts, lottery providers and online gaming companies. Over the past two years, Eldorado has made several acquisitions, making it the third-largest regional casino company, with 27 casinos and properties in 13 states. The company acquired Isle of Capri Casinos in 2017, and last year acquired the operations of Tropicana Entertainment in partnership with Gaming and Leisure Properties in a $1.8 billion deal.
GGB
March 2019 Index of Advertisers
AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 AGEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 AGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Aristocrat . . . . . . . . . . . . . .33, 35, 37, 38, 39 Aruze . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Cintas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Dickinson Wright . . . . . . . . . . . . . . . . . . . .19 Everi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Fabicash . . . . . . . . . . . . . . . . . . . . . . . . . . .63 Fantini . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 G2E Asia . . . . . . . . . . . . . . . . . . . . . . . . . . .72 GGB Podcast . . . . . . . . . . . . . . . . . . . . . . .57 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Incredible Technologies . . . . . . . . . . . . . . .25 Interblock . . . . . . . . . . . . . . . . . . . . . . . . . .13 Konami . . . . . . . . . . . . . . . . . . . . .Back cover Merkur . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 NIGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 RPM Advertising . . . . . . . . . . . . . . . . . . . .12 SBC Events . . . . . . . . . . . . . . . . . . . . . . . . .47 Scientific Games . . . . . . . . . . . . . . . . . . .9, 29 Southern Gaming Summit . . . . . . . . . . . . .31 International Gaming Institute . . . . . . . . . .59 UNLV GHES Series . . . . . . . . . . . . . . . . . . .55 Wipfli/Joseph Eve . . . . . . . . . . . . . . . . . . .43
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CASINO COMMUNICATIONS
Q
&A
Barry Cottle
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arry Cottle was named president and CEO of Scientific Games on June 1, 2018, replacing Kevin Sheehan. Cottle joined Scientific Games in 2015 to lead the strategy and growth plans of the company’s interactive group. During his time in that division, Scientific Games acquired NYX Gaming and its sports betting platform, setting the company up for the legalization that occurred last year. The acquisition of Don Best Sports late last year completed the company’s sports betting strategy. Cottle spoke with GGB Publisher Roger Gros at the ICE trade show in London in February. To hear a full podcast of the interview, visit GGBMagazine.com. GGB: Your first year at the helm of Scientific Games was pretty eventful. The Supreme Court sports betting decision made the decision to buy NYX Gaming very wise, and then the Don Best acquisition solidified your role as a sports betting provider. How did those acquisitions work in your favor?
Barry Cottle: I think it puts us in a great position, really, for three main reasons. Number one, with the acquisition of NYX and Don Best, what we have now is a best-in-class, fullservice, end-to-end sports betting solution, from platform through managed trading services that we can now offer as North America begins to regulate. In fact, today we’re already in Pennsylvania and Mississippi and New Jersey with Caesars. It puts us in a great position as that market starts to unfold. The second thing with NYX is that it brought us an iGaming platform. Today in New Jersey, around 50 percent of the iGaming bets come through our platform. As iGaming potentially rolls out, along with the sports betting, again, it puts us in a nice position as that happens. You recently oversaw a restructure of top management at Scientific Games. What was the strategy behind those changes, and how 74
Global Gaming Business MARCH 2019
President and CEO, Scientific Games
has that worked out so far?
Just recently, we promoted Jordan Levin to be the head of digital, and Pat McHugh to be the head of lottery. And I can’t even tell you how excited I am for both of these guys to take this position. Both have proven experience within Scientific Games, within those respective fields, in driving the operations and execution. They are hungry and passionate, smart guys, and I really have a ton of confidence that they’re going drive the business. Additionally, Jim Kennedy will continue to support our lottery group as chairman. Scientific Games has always been about the games, and particularly with your brands, WMS and Bally, certainly that’s impressive. So, how do you maintain the distribution across all the channels using these games?
First of all, when we think about building our products, it’s a player-first mentality. So, we focus on delivering games that our players enjoy and want to engage with. And we really look at it across all platforms. Whether you’re playing in land-based casinos or on a phone or device, we think about delivering that experience, for those franchises, wherever a player wants to play, on whatever a player wants to play. And then second is the optimal combination of art and science, which is perfectly, appropriately named, since we are Scientific Games. The science piece is really understanding the player behavior and motivations, and then combining that with the fun and the imaginative execution of each game. And the third is that we create a culture of creative passion across the organization to innovate and deliver on that. The combination of thinking “player” and using both sides of our brain, and doing it across the organization, ends up resulting in us being able to execute on our plans. Another hallmark of Scientific Games has always been the innovation. How do you keep your R&D teams on that cutting-edge technology?
Again, it really comes down to the player focus. We don’t innovate just for innovation’s sake. But we try to think how we enable a better player experience on two different levels: on the platform or system, which enables the content, and then the content itself. An example of a player innovation is personalization. So, when we talk about SG Vision and facial recognition, that’s about understanding the player and being able to customize an experience for them. If you look at one of our recent slot games, the Cash Wizard game that just came out, that actually has social elements. So, we’re starting to see that players like the social component within the games that they play. And so, our innovations are really about delivering on what we think the player motivation is driven by. We had a bump in the road recently with the Wire Act memo just a few weeks ago. What is your impression of how that’s going to impact your business?
As you know, we deliver our products and solutions across many regulatory environments of all sorts, which are constantly evolving. We just work to deliver the best products and services we can, side by side with our partners, and we’ll just continue to monitor it closely, and react accordingly. What do you see as the biggest opportunity in 2019?
There are just a plethora of products and services that we’re excited about this year. We have an embarrassment of riches, I like to call it that, going into 2019. The exciting thing is that we have great opportunities across all business units. We have a nice mix within each business in areas and markets that we can enter. We have four product business lines, where we see what we call “gap upside,” and improvements that can be made. And then we have new markets, such as sports betting, or iLottery, or a new business line that we could go into. So, it’s nice to have a mix, where you have core growth that can be accomplished across that diverse area.
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