Global Gaming Business, May 2015 by Global Gaming Business

GGB Global Gaming Business Magazine

May 2015 • Vol. 14 • No. 5 • $10

BIA’s PROGRESS IMPACT OF E-TABLES NIGC’s CHAUDHURI MONSTER MARKET IN MANILA

SPECIAL REPORT

Big Trouble

in Little

China

An analysis of Macau’s surprising downturn

Big Data

Use it or lose it

Official Publication of the American Gaming Association

Socially Acceptable

Marketing via electronic devices

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CONTENTS

Vol. 14 • No. 5

may

Global Gaming Business Magazine

COLUMNS

20 COVER STORY Macau’s Dilemma

16 AGA Issue Oriented

A special section examines the abrupt downturn of gaming revenues in the world’s highest-earning casino market, and what’s next for China’s Special Administrative Region.

20 The New Normal China’s crackdown on corruption has hit the VIP market hard, and as the government urges the SAR to diversify from gaming, operators are adjusting to a new reality.

Geoff Freeman

18 Fantini’s Finance Dear Mr. Fantasy Frank Fantini

26 VIP vs. Mass Marketing Success in Macau going forward means replacing traditional VIP-based market with mass-market gaming.

28 China’s Muscle

21 Dubious Top 10

The influence of the communist government of the People’s Republic of China is being felt in casinos from Macau to the Bahamas. By David Rittvo and Stephanie Adkison

By Grant Govertsen

24 Cotai Rising A look at the new resort projects coming to Macau’s Cotai section in the near future.

33 MGM in Macau A Q&A with Grant Bowie, president of MGM China. By Roger Gros

Data Power

Casinos have entered the era of big data, with new data sources providing unprecedented insight into the gaming customer. By Frank Legato

E-Table Revolution

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

Feature

Electronic table games are gaining popularity, both as an alternative and a supplement to live table games.

40 Social Science

By Dave Bontempo

iGNA Outlook

The Washburn Era

Assistant Secretary for Indian Affairs Kevin Washburn reflects on 30 years of Indian gaming.

DEPARTMENTS 4 The Agenda 6 Dateline 12 Nutshell 54 Cutting Edge 58 Frankly Speaking 60 Emerging Leaders

FEATURES

Brian D. Decorah

By Matthew Landry

By Roger Gros

The managing partner of Union Gaming Research Macau runs down the top 10 reasons for Macau’s current problems.

64 Regulation Bad for All

The emerging world of social media has provided new ways for casinos to know their customers. By Marjorie Preston

44 Ten Bold Political Moves, Part 1

With Eureka Casinos’ Alex Koch, Caesars Entertainment’s Valerie Turner, and Hybrid Interaction’s Shahar Attias

62 New Game Review 66 Goods & Services 69 People 70 Casino Communications With Jonadev Chaudhuri, Chairman, National Indian Gaming Commission

Mark Balestra

46 iGames News Roundup

By Dave Palermo MAY 2015 www.ggbmagazine.com

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THE AGENDA

The

Boardwalk

& Macau

Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com

Roger Gros, Publisher

hen you’ve been covering gaming as long as I have, you begin to notice parallels and history repeating itself. Legalization and regulatory efforts in some of the riverboat states were similar, particularly in Louisiana and Illinois— and now possibly Massachusetts. Mississippi followed the lead of Nevada and New Jersey, while the tribal compacts with Florida seem about to be repeated in Alabama. That’s why I was always confused about the supposed parallels of Las Vegas and Macau. Are there similarities? Certainly, starting with the claims of each to be the “capital” of gaming in their specific regions. Not to mention the massive gaming revenues produced by each jurisdiction. But as I prepare to head out for my annual visit to Macau for G2E Asia, the recent downturn there (which we chronicle extensively in our cover story starting on page 20) reminds me again of another fading gaming boomtown, Atlantic City. There was once seemingly no end in sight for the increasing gaming revenue of the East Coast’s only gaming destination. For 30 years, revenues increased each year, only beginning to slide once regional competition arose. Although Atlantic City was blessed with a great location on the edge of the Atlantic Ocean, little was done to prepare for the day when gaming might not be the tourism driver it always was. But then again, few believed that day would come. Well, when it did come, it came with a vengeance. The addition of non-gaming attractions has done little to stem the outgoing tide of gaming revenues, even if perception is nine-tenths of the problem. Regional competition was not the culprit in Macau’s recent downturn, but something else that is also clearly understood in Atlantic City was to blame: rigid government oversight. For the first 10 years of their existence, an overbearing regulatory structure conspired to prevent Atlantic City casinos from reaching their full potential. Innovation was stifled by strict rules and regulations, while politicians ignored the coming competition. In Macau, it took nothing less than a directive from the president of China to start the ball rolling downhill. And with a complicit chief executive in Macau, there doesn’t seem to be an end.

Global Gaming Business MAY 2015

Vol. 14 • No. 5 • May 2015 Roger Gros, Publisher | rgros@ggbmagazine.com

To be sure, the consensus of Macau casino executives I’ve met with over the years always seemed too rosy to me. Yes, market penetration into their most favorable Chinese regions was in the single digits. But to think that there would be no pushback from a Communist government was not realistic. And now that it has come to pass, it’s been harsher than most anticipated. The most damaging issue has been corruption, intimating that the Macau casinos are just as corrupt by association. While that may have a grain of truth with the VIP junket operators, the Macau casinos have stayed, for the most part, squeaky clean. But the perception is now, if you go to Macau, you must be doing something wrong. Bad message at a terrible time. And there is no letup. The government is pressing a total smoking ban in a culture where smoking is still prominent. I understand protecting the health of the workers and the customers, but there’s a middle ground that has been reached in most U.S. jurisdictions, including Atlantic City. There seems to be no effort to find that compromise in Macau. And then there’s the regional competition issue. Even though it’s at least four hours away by plane, the Philippines has opened some truly first-class casinos in Manila’s Entertainment City. Macau companies and executives are involved there. Vietnam’s Grand Ho Tram is just an example of the top-flight casino resorts that could become prevalent there. The Primorye region of Russia is about to debut. South Korea is loosening its casino laws. So while the damage is being done in Macau primarily by government intervention, the Atlantic City-like regional competition could be the next hurdle for the SAR. And here’s where the government is correct. Non-gaming attractions are going to be the engine that drives the Macau economy. And with another parallel to Atlantic City, gaming revenues account for more than 70 percent of all revenue at Macau casino resorts. Macau needs to be more like the Las Vegas Strip, where less than 40 percent of revenues are gamingderived. This could be achieved, however, by protecting gaming revenues, and keeping your eye on the ultimate goal: making Macau a full-fledged destination resort, with gaming as a major amenity.

David Coheen, North American Sales & Marketing Director dcoheen@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com Becky Kingman-Gros, Chief Operating Officer bkingros@ggbmagazine.com Lisa Johnson, Communications Advisor lisa@lisajohnsoncommunications.com Columnists Mark Balestra | Brian D. Decorah Frank Fantini | Geoff Freeman Contributing Editors Stephanie Adkison | Dave Bontempo Alexis Garber | Grant Govertsen | Matthew Landry Erika Meeske | Dave Palermo | Marjorie Preston David Rittvo | Robert Rossiello

EDITORIAL ADVISORY BOARD Rino Armeni, President, Armeni Enterprises

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

• Julie Brinkerhoff-Jacobs, President, Lifescapes International

• Nicholas Casiello Jr., Shareholder, Fox Rothschild

• Jeffrey Compton, Publisher, CDC E-Reports

• Geoff Freeman, President & CEO, American Gaming Association

• Dean Macomber, President, Macomber International, Inc.

• Stephen Martino, Partner, Duane Morris, Baltimore

• Jim Rafferty, President, Rafferty & Associates

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

• Steven M. Rittvo, President, The Innovation Group

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

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

• Roy Student, President, Applied Management Strategies

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

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DATELINE USA may2015

Brick Wall

Wynn project delayed again in Massachusetts

assachusetts Secretary of Energy and Environmental Affairs Matt Beaton last month hit the brakes suddenly on the Wynn Everett casino project when he ruled that the project “does not adequately and properly comply” with the state’s environmental laws. He declined to issue a permit that the $1.7 billion casino project needs to proceed to build along the Mystic River in Everett. Wynn’s project includes a 629-room tower hotel on 34 acres. The Massachusetts Environmental Policy Act (MEPA) requires that the 33-acre project’s traffic and transportation impacts would need to be addressed under a separate review, said the secretary. In a key decision, Beaton ruled that the land transfer of 1.75 acres in March between the Massachusetts Bay Transportation Authority and Wynn for $6 million before that en-

CASINO PLAN SCRAPPED Florida will have to wait for commercial casinos

as Vegas-scale resort casinos in South Florida are a dead issue for at least another year. Lack of political support has prompted Dana Young, majority leader of the Republican-controlled House of Representatives, to rewrite a bill she introduced at the start of the legislative session to scrap a provision calling for two casinos in Broward and Miami-Dade counties. Supporters in and out of the legislature have Florida Governor been trying for years to open the state’s popular Rick Scott southeastern coast to casinos, and industry giants Genting Group and Las Vegas Sands have lobbied heavily for the chance to invest, only to see a succession of proposals defeated by a coalition of conservative upstate lawmakers and corporate heavyweights such as Disney and the Florida Chamber of Commerce. Young’s rewritten bill, a “final consensus product,” as she termed it, has whittled her original 300-page measure to 60 pages, although it still would allow greyhound tracks to offer poker and other forms of gaming even if they discontinue live racing, a controversial issue that has failed to clear legislative muster in the past. However, the new bill does not address the touchy negotiations with the powerful Seminole Indian Tribe on a new five-year Class III compact to replace the one due to expire this summer. The Seminoles, owners of the large and highly profitable Hard Rock casinos in Hollywood and Tampa, have been airing television ads and pursuing an aggressive public relations and lobbying campaign to persuade legislators to maintain the current deal, which was negotiated in 2010 and grants the tribe a monopoly on housebanked card games such as blackjack at five of its seven venues in exchange for payments to the state that have totaled more than $1 billion to date. Senator Rob Bradley proposed a one-year extension of the existing pact.

Global Gaming Business MAY 2015

vironmental review was complete also was a violation. He suggested putting the land into escrow until the final review is complete, or reversing the land transfer altogether. Wynn had hoped to be able to begin soil preparation on the highly polluted site this summer. The land provides a vital access link to the site, important because it is outside of the jurisdiction of the city of Boston, which has opposed the project from the beginning, is suing to try to stop it, and is expected to do anything it can to delay it. The city of Revere, which was the site of a rival casino proposal by Suffolk Downs and the Mohegan Sun, has called on an investigation of the land purchase.

Rising From the Ashes Straub buys Revel, power cut immediately

sale of Revel Atlantic City has been approved again. The question is whether it will stick this time. A bankruptcy judge has approved the sale of the $2.4 billion casino property to Florida developer Glenn Straub for just $82 million. Straub also announced that he has purchased the Showboat from Stockton University for $26 million. Stockton had bought the building from Caesars Entertainment for $18 million to use as a satellite campus for the college. But two weeks ago, Trump Taj Mahal owner Carl Icahn invoked a clause in a 1988 agreement by the three uptown casinos at that time, Resorts, Trump Taj and Showboat, that all were to be operated as first-class casinos, fearing that the Taj would become a magnet for underage gamblers. It’s unclear how Straub’s purchase of Showboat clears up that issue. Trump Entertainment CEO Robert Griffin was adamant. “We will not allow it,” Griffin said. Just two days after Straub closed on the bankrupt casino, the site’s sole energy provider—ACR Energy Partners—began shutting down power and water to the building. The move highlighted the long-running battle between ACR, which controls a power plant built solely for Revel, and potential buyers of the casino. The high cost of power for the building and the high construction debt for the plant have been a stumbling block in several previous potential sales of Revel and is seen as a major reason the casino went bankrupt and closed in the first place. To make things worse, the city of Atlantic City imposed a fine of $5,000 a day on Straub for failing to maintain power and fire suppression systems. Fire officials in Atlantic City said it would be impossible to fight a fire in the 47-story tower due to the lack of power and water.

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DATELINE TRIBAL may2015

Finally, a Fix?

Senator Jon Tester

Senator introduces Carcieri remedy

.S. Senator Jon Tester of Montana, vice chairman of the Senate’s Committee on Indian Affairs, has re-introduced a bill advertised as a “clean fix” to the Supreme Court’s Carcieri v. Salazar ruling that held that tribes recognized by the federal government after 1934 cannot put land into trust. The bill would amend the Indian Reorganization Act of 1934, which the Supreme Court held set the rules for putting land into trust. Ever since the 2009 Carcieri ruling, tribes have been heavily pressuring Congress to “fix” the ruling so that the BIA can resume allowing tribes to put land into trust unhindered. Many tribes consider the ruling anti-Indian and a direct knife blade into the heart of tribal sovereignty. Justice Clarence Thomas wrote the majority opinion for the 8-1 ruling. He noted that the 1934 act authorized the Secretary of the Interior to take land into

Cash Drain Report says Connecticut could lose millions to neighboring states he two Connecticut tribes that operate Foxwoods and Mohegan Sun last month released a report that claims the new casinos in Massachusetts and New York will drain $570 million a year from the state’s casino revenues by 2017 unless defensive measures are taken. The state will also lose nearly 6,000 jobs, according to the report. But that would not be the end of the losses. Vendors who service the two casinos New England gaming expert Clyde Barrow would also be subject to job losses, nearly 2,000, according to the report. Another 1,600 jobs would be lost because the workers laid off would be spending less money. The state collects 25 percent of the two casinos’ revenue in taxes. The report concludes, “These figures indicate that the opening of resort casinos in Massachusetts and New York is about to catalyze one of the largest interstate transfers of gaming revenue in recent U.S. history— second only to the transfer from New Jersey’s casinos to Pennsylvania’s casinos that occurred from 2006 to 2014.” The report is by Clyde Barrow, an expert in the New England gaming market, and currently chairman of the political science department at the University of Texas-Rio Grande Valley. Barrow had been analyzing the area gaming market for two decades before he moved to Texas. He relied on much of the data that he accumulated during those years to arrive at his conclusions. The defensive measure the tribes support is a bill before the legislature that would allow up to three small casinos that would be strategically placed near the border to keep state residents from gambling in the Bay State.

trust for “any recognized Indian tribe now under federal jurisdiction,” and that “now” meant 1934. He created considerable confusion by not defining what “under federal jurisdiction” meant. Tester’s bill would amend the act by removing “any recognized Indian tribe now under federal jurisdiction” and replacing it with “any federally recognized Indian tribe.” According to Tester, “This bipartisan bill was built with tribal input and eliminates unnecessary hurdles for tribes to increase economic development opportunities. The court decision had a negative impact on tribes across the nation by causing costly litigation and harmful delays in critical infrastructure development. This solution addresses one of Indian Country’s top priorities and is a strong step forward to fulfilling the federal government’s treaty and trust responsibilities.” As “clean” as Tester’s “fix” is, it is unlikely to pass without considerable tinkering from senators who see this as the golden opportunity to fix things about the process of putting land into trust that they don’t like. Most powerful and insistent among them is California’s senior senator, Dianne Feinstein, who strongly opposes the current approach by the Department of the Interior for making it easier for tribes to put land into trust, and to build Indian casinos. At the first hearing for Tester’s bill, Feinstein said, “Any Carcieri fix must address concerns about tribal gaming.”

OK in Oklahoma State tribes reopen casino, propose another

he Eastern Shawnee Tribe’s Bordertown Casino and Arena in WyanBordertown Casino & Arena dotte, Oklahoma, just across the Missouri state line, reopened on April 2. The country-western themed casino offers 537 gaming machines, a restaurant and banquet hall—plus an arena that will host bull-riding events and concerts. The original Bordertown Casino was closed in 2013 and replaced by the nearby Indigo Sky Casino. In September, the tribe announced plans to renovate the old Bordertown Casino. Meanwhile, due west from Wyandotte in the Oklahoma panhandle, the Shawnee Tribe has applied to the Bureau of Indian Affairs to take into trust land it owns near Guymon for a Golden Mesa Casino. Tribal leaders said the casino could add 175 new jobs, generate $3.7 million in annual payroll for the local economy and help promote tourism to the Oklahoma panhandle. If the BIA approves the application, construction could start in late 2016. The application surprised the locals, however. Guymon City Manager Kimberly Meek said, “No one had any inkling that they were considering it. We did not know the land had been purchased and we were just as surprised as everyone else.” She said the proposed casino land is not within the city’s jurisdiction and that some groups are planning to oppose the application. MAY 2015 www.ggbmagazine.com

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DATELINE ASIA may2015

Olympic FAil

Japan casino bill stuck in limbo

MALAYSIAN MALAISE

Weaker ringgit will hurt Singapore casinos

apanese lawmakers are taking their time considering a bill that would legalize casino gaming in the country. Supporters of the bill had pledged to re-submit the legislation by March 31, the last day of the fiscal year, but failed to win support from a junior partner in Prime Minister Shinzo Abe’s coalition. Abe supports the bill as a way to grow Japan’s economy and introduce what some say could be a multibillion-dollar industry. The lawmakers now reportedly hope to submit the bill in April. “It’s vital to have all the parties in the integrated resort parliamentary league on the same page,” said Takeshi Iwaya, a senior member of Abe’s Liberal Democratic Party. “I won’t comment on when we can submit the legislation, but we want to proceed promptly, as soon as the groundwork is done.” The Japanese parliament, called the Diet, has been considering the bill since 2013. Lawmakers missed a deadline to vote on the bill last November,

S and have not made any progress this year. Opponents of the bill, including Abe allies and religious leaders, fear that casinos could lead to problem gambling and associated social ills. Supporters see the dollar signs: According to Reuters, brokerage CLSA estimates that casinos in Japan could generate annual revenues of $40 billion. And global gaming companies are eager to buy in. Interested investors include Las Vegas Sands Corp. and MGM Resorts International. If a bill is not pushed through soon, it’s unlikely that casinos would be open before the 2020 Summer Olympics in Japan.

Thrilla in Manila Earnings sure and Okada gets OK

s the market in Macau slides into recession, another gaming jurisdiction in the region is booming. The Nikkei Asian Review reports that Travellers International Hotel Group, which owns Resorts World Manila, doubled its net profit to 5.45 billion pesos ($121.6 million) in 2014. Bloomberry Resorts, which operates the Solaire Resort & Casino, saw a net profit of 4.07 billion pesos (US$271 million), a dramatic change from its opening year, 2013, when it reported a net loss of 1.32 billion pesos. Despite the overall increase in profits, Resorts World’s gaming revenues dropped 5 percent to 28.41 billion pesos. Analysts say the decline was due in part to new competition from Solaire, and also due to the resort’s move away from VIP players. The emphasis on mass-market play, however, has helped to shield the market from catastrophic losses such as those seen in Macau and Singapore. Meanwhile, Solaire’s gross gaming revenues doubled to 30.39 billion pesos. 8

Global Gaming Business MAY 2015

Kazuo Okada’s Tiger Resort in Manila

At the February grand opening of City of Dreams Manila, Melco Crown Co-Chairman and CEO Lawrence Ho affirmed that the target customer for the Manila resort is “first and foremost the domestic market,” followed by VIPs from other Southeast Asian countries and visitors from South Korea. Two more mega-casinos are planned for Manila Bay: one from Travellers, and one from Kazuo Okada’s Universal Entertainment. The latter resort was originally slated for completion this year, but the Philippine Amusement and Gaming Corp (PAGCOR) just granted a two-year exten-

ingapore’s mass-market gaming revenues are expected to decline as the Malaysian ringgit hits a new low against the Singapore dollar, according to analysts cited on AGBrief.com. Malaysians and Indonesians lead mass-market play in the Southeast Asian republic. So the weakness of the ringgit will have an impact, even after Genting Singapore opens its new 550-room Hotel Jurong later this month, analysts said. The Jurong is the first major hotel to open in the western part of Singapore, according to the Straits Times. Singapore draws about half its annual gaming revenues from mass-market visitors. “The weakening of those currencies further negatively impacts the tourist arrivals and hence the revenue potential from the mass market, in our view,” said Macquarie analyst Somesh Kumar Agarwal. He predicts Singapore’s mass-market volume will grow 5 percent this year, compared to 6 percent in 2014. “Middle-class tourists are always looking at what their purchasing power is in the country they are visiting,” Jonathan Galaviz, a partner at consultancy Global Market Advisors, told Reuters. “If the value of their currency is going down fast comparatively to where they want to visit, they will opt for cheaper destinations or even simply just stay home.”

sion to Universal, which has said it will invest an additional US$700 million on the resort and increase its total area by 97,000 square meters (1.04 million square feet). Okada’s Universal Entertainment has been investigated for corruption in the Philippines, Japan and the United States, but the company has announced that the probe in the Philippines is over. Okada made the announcement in a filing to JASDAQ, and added that the company expects related inquiries in the U.S. to be closed for “lack of evidence.” The grand opening of Tiger Entertainment’s Manila Bay Resorts has been pushed back to the first quarter of 2017, according to Innovategaming.com.

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DATELINE EUROPE may2015

France: ‘Oui’ TO Paris casinOs? Some clubs raided, closed

here may be a model of one in Las Vegas and soon to be in Macau, but today, there are no casinos in Paris. According to French law, casinos cannot be built within 100 kilometers of the capital city. That all may change, according to an unnamed lawmaker who spoke to Le Parisien. The lawmaker, described as a member of the opposition to the Council of Paris, said the government is aware that casinos may be a feasible way to generate new tax revenues without undue negative consequences. “If we are pragmatic, we must take two factors into account: first, that the casinos are located in nearly 200 towns in France and all goes well; then, that

such a perspective represents substantial tax revenues not only for the state, but also for Paris.” Since 2007, 13 so-called “cercles de jeu” or private gambling clubs in Paris have been shut down. Some of the private clubs are legal; those raided by French police were targeted for alleged money laundering and reported links to organized crime, among other offenses.

FOBT Losses in U.K. Dispute

London’s Park Lane Casino

Anti-machine forces push for low stakes

Up On The Roof London casino caters to true “high” rollers he management team at a London casino has figured out how to get around the government’s no-smoking rules. The Park Lane Casino at the Hilton Hotel will add gaming tables on the roof so gamblers can smoke while they play. “Many of our clients come from countries where smoking bans do not apply,” David Mills, the hotel’s operations director, told the London Daily Mail. “We want to provide them with a relaxing and enjoyable experience.” “It’s no secret that casinos have been looking for ways to get around the smoking ban since it was introduced in 2007,” an unnamed source told the Mail, “and this is one of the solutions they have come up with.” Gaming tables will be placed on the rooftop terrace so roulette, blackjack, baccarat and 3 Card Poker can be played under the stars, reported the Danil News. The Park Lane Casino, which opened at the Hilton in November, attracts many high rollers, including a large number of players from the Middle East. Membership costs £1,000 (US$1,480) a year. The rooftop garden-cumcasino opened in April.

Global Gaming Business MAY 2015

ilary Douglas, campaigns director of the Association of British Bookmakers, has refuted a publicized report saying Scottish gamblers lost £160 million (US$237 million) in 2014. But representatives of the Campaign for Fairer Gambling say Douglas is wrong, and the original published figure was accurate. Douglas said a recent Health Survey showed that problem gambling rates are low, at about .04 percent, reported Gaming.com. The fair-gambling group says £160 million “is in fact an estimate of the total losses, which has been derived from Gambling Commission data, operator annual reports and research carried out by the Responsible Gambling Trust. “We note,” the group added, “that Hilary Douglas does not provide an alternative figure.” According to the group’s figures, research by the RGT found that 37 percent of FOBT users are problem gamblers. Forces throughout the U.K. are pressuring the gaming industry and the government to reduce the maximum stake to £2 per spin “to reduce the harm that this highly addictive product causes,” wrote Derek Webb, Adrian Parkinson and Matt Zarb-Cousin of the Nottingham-based Campaign for Fairer Gambling.

In Russia, Ho a Slow-Go Far East district hopes to rival Macau

xecutives with First Gambling Company of the East say its long-delayed $700 million gaming resort in Russia’s Primorye casino district will open in Primorye Casino phases starting this summer. Company CEO John Wang told Russian officials the 140-room hotel and casino will open first, sometime in July. A partnership led by Lawrence Ho’s Melco International Development, First Gambling also includes Taiwan-based gaming manufacturer Firich Enterprises, Hong Kong’s Perfect Giant Investments and local partner Elegant City Group. Ho has said Melco Crown is grappling with “challenging market conditions” in Macau but expects great success for its Studio City project, set to open this fall, as well as the City of Dreams Manila that opened in the Philippines in February. In addition to the Primorye facility, which was first announced in 2013, Melco International is also pursuing possible casino projects in Barcelona and the Republic of Georgia.

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DATELINE GLOBAL may2015

Baha Mar Puts On the Brakes Second time opening is delayed t

he lavish $3.5 billion Baha Mar casino resort, scheduled to host a soft opening last month, pulled the plug on that event, saying the 405hectare (1,000-acre) resort isn’t ready for public inspection. It’s the second delay in the opening of the resort. According to the Miami Herald, the company blames its Chinese partners and Chinese workforce for the delay. In a statement, Baha Mar said the lead contractor, China State Construction Engineering Corp., “has not completed the work with an attention to detail consistent with Baha Mar standards of excellence.” That prompted a flood of online complaints from guests who had planned to travel in for the festivities. Among them was Californian

Rising Sun South African giant buys

Lisa Katz Grossman, who wrote, “Totally unacceptable how you kept this info from everyone and only us who happened to ‘like you’ on Facebook happen to stumble upon it.” The grand opening was set for May, and now that timeline is also uncertain. The resort’s Facebook page said, “We will not open our doors until we are positive that we can deliver the best experience our guests deserve.” Baha Mar was originally scheduled to open in mid-December to take advantage of holiday vacationers. That too was postponed, seemingly for similar reasons. At the time, Robert Sands, a senior vice president, said the opening was postponed so Baha Mar could “provide a full luxurious experience.” Some 4,100 Chinese laborers are working on

Peermont owns the Emperors Palace resort, near Johannesburg, plus competitor properties located in South Africa and Botswana

ohannesburg-based Sun International Ltd., owner of the Sun City resort, announced it will buy local rival Peermont Global for $768 million to add leisure operations and increase gambling sales. The purchase will allow Sun to “undertake larger developments and acquisitions internationally,” officials said. Founded by South African hotel magnate Sol Kerzner, Sun is South Africa’s biggest hotel and casino operator by number of markets, with 27 resorts across Africa and the Americas. Founded in 1995 under the name Global Resorts, the group was rebranded Peermont Global in 2003. It was purchased in a private equity-led buyout by a consortium led by Mineworkers Investment Company. Peermont owns the Emperors Palace resort, near Johannesburg, with 667 rooms and 1,724 slots. The company also operates a portfolio of gaming and hospitality businesses in South Africa and Botswana, owning nine casino resorts, three hotels and one casino. Sun International’s Chief Executive Graeme Stephens said, “Emperors Palace is one of the largest casinos in South Africa, with an attractive financial and operating profile. Peermont has a number of complementary attributes that will enhance our group. This acquisition will enhance Sun International’s position and scale as a leading hotel, resort and gaming operator, which in turn positions it well to undertake larger developments and acquisitions globally.” Stephens added Sun International’s medium-term objective is to “create a portfolio of fewer, larger, quality assets.”

the project, which is being financed by the ExportImport Bank of China and China State. China State Construction refuted statements by the developer, telling the Nassau Guardian they are “wholly inappropriate and inconsistent with the history of this project.” The resort has been described as the most expensive project ever in the Bahamas. It includes six hotels, 40 restaurants and clubs, and a golf course along with the Caribbean’s biggest casino.

Off the Back Burner Casino debate reopens in Toronto imes are tough in Toronto these days, as jobs are hard to come by, and businesses are facing an alarmingly high turnover rate. One controversial solution to the problem is to turn the Woodbine racetrack into a full casino. As is usually the case, many detractors exist. Mike Layton, city councilor for downtown Ward 19, said, “I want to make sure these are good jobs, not just jobs.” Layton took his opinions to Twitter, claiming casinos cost communities more than they gain. “The pathway to prosperity and good jobs isn’t paved by promises Toronto’s Woodbine of a golden mile. It’s done with new ideas and in- racetrack vestment. Not shortcuts,” he tweeted. Toronto Mayor John Tory has reopened the casino debate, to the surprise of some. Conservative spokeswoman Amanda Galbraith said Tory is focused on “jobs, jobs, jobs.” In an e-mail, Galbraith said, “If bringing jobs and investment in the northwest part of Toronto involves consideration of expanding gaming at Woodbine, the mayor is willing to have that discussion.” It isn’t just a casino the mayor wants, though. “The mayor would like to see a broader kind of entertainment complex in that area than a stand-alone box casino. Expanded gaming at Woodbine racetrack has to be in concert with a much bigger vision that would drive economic development,” said a spokesman. Deputy Mayor Denzil Minnan-Wong, who has opposed casinos in the past, said, “I think gambling is a horrible way to raise tax dollars.” Layton wants to see the city do “something new, something bold that would actually build sustainable, well-paying jobs in that neighborhood.” In 2013, Minnan-Wong voted against building new gaming facilities in Woodbine, which lost 24 to 20.

MAY 2015 www.ggbmagazine.com

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NUTSHELL Atlantic City and New Jersey officials gathered with Philadelphia developer Bart Blatstein last month for a press conference celebrating one of the first pieces of good news for the seaside resort in many months, when Blatstein unveiled his plans to transform his recently purchased Pier Shops at Caesars mall into a live entertainment and dining venue he promised will launch a new era for the beleaguered Boardwalk. With renowned casino architect Paul Steelman at his side, Blatstein announced that the Pier Shops facility will be reborn by Christmas as “The Playground,” a dining and entertainment center with 14 live music venues at its heart, which he promised will make Atlantic City the “music capital of the Northeast.” Blatstein said the vision to be created by his Tower Investments development firm and Steelman’s firm, Las Vegas-based Steelman Partners, will offer a concentration of live music that will recreate the vibe of Beale Street in Memphis, Sixth Street in Austin or Music City in Nashville. The Lottery and Gaming Study Commission in Delaware, made up of government officials and lawmakers, has twice recommended tax breaks for the state’s three current racinos, which have struggled against new competition in Maryland and a high tax rate that has squeezed profits. However, at each of the panel’s meetings, a Delaware attorney delivered testimony criticizing the casinos for seeking a state “bailout.” The attorney is now reportedly working with state lawmakers on a plan that would address the sagging state revenue from casinos by… adding even more casinos. The plan would create three new casino licenses for the state, up for public bid at a price of $10 million per license. The U.K. Gambling Commission says outgoing CEO Jenny Williams will remain in the role until September, due to “the protracted time scale related to making government-related public announcements.” UKGC has identified a possible new CEO, but no announcement will be made until after the U.K. general election May 7. Scientific Games Corporation has confirmed that Santa Casa da Misericórdia de Lisboa, the operator of the Portuguese State Lottery, reported record instant game sales in 2014, a year-over-year increase of 18 percent. The trend has continued in 2015 with instant game sales exhibiting an unprecedented year-over-year

increase of more than 35 percent thus far. Scientific Games signed a two-year contract in February 2014 to provide instant games and related services to SCML. Japanese Konami Corp., parent of slot-maker Konami Gaming, notified the New York Stock Exchange that it will apply for voluntary delisting of its American Depositary Shares. The delisting was to become effective on April 24, the company said in its latest filing. The firm will also file a form on with the U.S. Securities and Exchange Commission for deregistration, which should become effective in July. The plan to delist its ADSs had been announced in November, with Konami saying that the listing on the NYSE was “not economically justified” and the trading volume of its share on the NYSE accounted “for only a small fraction of the total trading volume of its shares.” Hong Kong-listed Landing International Development, based in mainland China, has ended negotiations to acquire the foreigners-only Alpensia Casino at Holiday Inn Resort in Pyeongchang, South Korea, the company has announced. In December, the firm agreed to pay HKD868.7 million (US$112 million) to buy Wealth Seed Group Ltd., which operates Alpensia. Landing had planned to expand the casino from 16 to 70 gaming tables. Pennsylvania’s Parx Casino has denied rumors that it is the unnamed casino that officials of European online gaming giant bwin.party has tapped as a partner in potential legalized iGaming in the state. Bwin announced that it is partnering with a state casino in the event iGaming is legalized, and speculation immediately turned to Parx, the most profitable casino in the state. The Bensalem casino has ended those rumors, stating specifically that it is not partnered with the online company. Leading gaming testing company Gaming Laboratories International was granted conditional independent testing laboratory certification pursuant to Massachusetts regulations. Full certification is expected to be issued contingent on the outcome of a full background investigation and review by the state’s Investigations and Enforcement Bureau. The conditional certification enables GLI to immediately begin to execute independent testing and certification services on behalf of the MGC.

CALENDAR May 5-7: Southern Gaming Summit, Mississippi Coast Coliseum & Convention Center, Biloxi, Mississippi. Produced by BNP. For more information, visit sgsummit.com. May 13-14: SAGSE 2015 Panama, El Panama Hotel, Panama City, Panama. Produced by Monografie. For more information, visit SAGSEpanama.com. May 19-21: Global Gaming Expo (G2E) Asia 2015, The Venetian Macao. Produced by Reed Exhibitions and the American Gaming Association. For more information, visit G2EAsia.com. 12

“They

Said It”

“How many other times in history has there been an ex-spouse on the board of the company she founded in litigation with the head of the company? This case is really one in a million.” —Nell Minow, vice chair of ValueEdge Advisors, speaking on the unusual circumstances surrounding the Wynn Resorts saga

“It’s just not as fun here as it used to be.” —Macau gambler, speaking to Forbes magazine

“You may have some doubts as to what I’ve been doing because of the reports in the press, including Reuters and Asahi Shimbun. These are all misunderstandings. They portray me as if I’m a bad person but that’s not the case.” —Kazuo Okada, casino magnate and chairman of Universal Entertainment, on allegations of bribery in connection with his Manila casino project

“Every day, we see more and more evidence that our rationale for the acquisition is tremendous and that the combination has created a company that is distinctly differentiated from any other.” —Ram Chary, CEO of Global Cash Access, on his company’s acquisition last year of Texas-based slot manufacturer Multimedia Games

“With all that crap, there’s got to be a pony in here somewhere.” —Dan Lee, CEO of Full House Resorts, to the Las Vegas Review Journal comparing his situation taking over the company to a young boy coming downstairs on Christmas morning

May 27-28: East Coast Gaming Congress & iGaming Institute, The Borgata, Atlantic City. Produced by Spectrum Gaming, Cooper Levenson and the Friedmutter Group. For more information, visit EastCoastGamingCongress.com.

“I think REITs make a lot of sense for shopping malls, but casinos are in an industry that requires a high amount of maintenance. Once they are split off, then the two companies have different objectives.”

June 10-11: Indian Country Online, Pala Casino Spa and Resort, Pala, California. Produced by Pechanga.net and Spectrum Gaming Group. For more information, visit IndianCountryOnline.com.

—Wall Street gaming analyst Jason Ader, on the possible negative long-term effects of placing gaming properties in real estate investment trusts, subject to negative impacts on real estate values as interest rates rise

June 15-18: NAGRA Annual Conference 2015, The Inverness Hotel & Conference Center, Englewood, Colorado. Produced by the North American Gaming Regulators Association. For more information, visit NAGRA.com. June 16-18: Canadian Gaming Summit, Caesars Windsor, Windsor, Ontario. Produced by the Canadian Gaming Association. For more information, visit CanadianGamingSummit.com.

Global Gaming Business MAY 2015

“We don’t think that’s fair. They don’t ask how much you’ve lost.” —Pennsylvania slot player Dolores Derbis, on the Internal Revenue Service’s proposed plan to lower the reporting threshold on slot win from $1,200 to $600

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AMERICAN GAMING ASSOCIATION

Issue Oriented AGA continues to unite the industry to give it a stronger voice on pressing issues By Geoff Freeman, President & CEO, American Gaming Association

e’re only a few months into 2015, but already we’ve made significant positive changes to the AGA that are uniting the industry and giving us a stronger voice on important issues here in Washington and in each of the 40 states where gaming operates. In January we announced six new board members, including the first tribal casino. In March, we added four more board members. Through these changes, we’re being inclusive of new players and more communicative and more transparent in our initiatives. These new members will make our organization and the gaming industry even stronger as we tackle important issues. One of those issues is a complex, sweeping proposal by the IRS. Working with the industry’s leading tax policy experts, we have begun a deep analysis of the proposal. We have held extensive consultations over the past two weeks with a wide range of members. While we have heard a variety of viewpoints regarding the proposal, on one point members have been crystal clear and unanimous: all oppose lowering the reporting threshold on gaming winnings from $1,200 to $600. This threshold has not been updated since Jimmy Carter was president and Saturday Night Fever debuted on the silver screen. To now cut the threshold in half will create burdensome, unnecessary paperwork and reporting requirements and severely undermine the customer experience. In addition to the IRS issue, we’re advocating for the next attorney general to take action to crack down on illegal gambling operations. In response to a question during her nomination hearing about how she would tackle illegal gambling, Loretta Lynch expressed a strong desire to take on this challenge. In the coming months, you will see an unprecedented level of collaboration between industry and law enforcement—whether sheriffs, district attorneys, state attorneys general or the Department of Justice.

And we’re seeking a higher ranking for Las Vegas in the Department of Homeland Security’s grant programs, to enable the city to receive an increase in much-needed security funding. This funding is needed to protect Nevada’s $53 billion gaming industry, its residents, and the 40 million visitors each year. We’re working hand in hand with the city and the Nevada delegation to ensure the unique characteristics of Las Vegas, and gaming in general, are taken into consideration. Further, our work with FinCEN continues to ensure a strong, collaborative partnership with the gaming industry. Earlier this year, FinCEN released

“

In a highly competitive environment, the gaming industry must be empowered to meet changing consumer demands, reinvest in its product and rapidly innovate.

Global Gaming Business MAY 2015

”

new guidance for sports books operations—guidance that we welcomed, confident that our members are already employing robust anti-laundering measures in this area. However, we made sure to note that the risk of money laundering is far greater in the vast, unregulated, illegal sports betting market, where no oversight exists whatsoever. Given this increased scrutiny, we’ve made a point to highlight just how large the illegal sports betting market is. Illegal betting on the Super Bowl, for example, encompasses a market that is 38 times greater than the legal sports betting market. For March Madness, $9 billion in betting will have taken place, with the vast majority of that being outside of the legal, regulated Las Vegas sports books. We continue to discuss the topic of sports betting with our members to determine the best way to address this issue. Finally, I’ve emphasized that AGA seeks to be a passionate champion for gaming. Through our “Get to Know Gaming” campaign, we’re doing just that. In February, we launched our Faces of Gaming ini-

tiative to highlight the employees of the industry, with new research showing that gaming offers more than 200 different career paths and provides a path to the middle class for workers of all backgrounds. We look forward to highlighting employees in gaming markets across the country, many of whom will have the opportunity to play a role in choosing our next president. Because gaming supports more than half a million jobs and $75 billion in revenue in key presidential states, we launched Gaming Votes to flex our muscle as an industry. This is a first-of-its-kind foray for the gaming industry into presidential politics that is educating candidates about the economic benefits of our industry and educating our employees about the candidates. Today, with gaming in 40 states, every federal issue affects gaming in some way, whether it’s tax reform, immigration reform, trade or health care. Beyond D.C., we’re playing an active role in states, whether it’s providing the facts in Florida or pushing back against ill-conceived tax increases on table games in Maryland. More broadly, I was in Las Vegas in March to lay out a framework for “Next Generation Gaming Policy” principles that streamline regulations, remove barriers to innovation and encourage regulators to be more nimble. It’s clear that the policies that have guided the gaming industry for the past 20 years are, in many instances, obstacles to the industry’s future success. In a highly competitive environment, the gaming industry must be empowered to meet changing consumer demands, reinvest in its product and rapidly innovate. Over the coming weeks and months, we will be elaborating on this framework of Next Generation Gaming Policy, which will address key topics that include taxation, reinvestment, responsible gaming, shipping requirements, licensing and more. It’s as busy a time as ever for gaming, with many exciting opportunities to move our industry forward. We are tackling these opportunities, as well as the challenges, every day. With a more transparent, inclusive AGA, we’re well-positioned to address every issue with a unified voice that’s as strong as it’s ever been.

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FANTINI’S FINANCE

Dear Mr. Fantasy How daily tournaments have dramatically transformed an industry

ecently, it was social gaming that swept up from seemingly nowhere to take the gaming industry by storm. Now it’s fantasy sports betting. Or more precisely, daily fantasy sports betting. An activity that was born seemingly by sports nuts who didn’t have a life has morphed into a multibillion-dollar business with potentially significant investment and business implications: • Creation of a whole new segment of the gambling industry. • Creation of companies that might be worth billions of dollars to investors. • The merging of the interests of gambling companies and historically anti-gambling enterprises such as Disney and Major League Baseball. • And, because of that merger of interests and its resultant new business models and alliances, perhaps a vehicle at the vanguard of legalizing sports betting in the United States. The most recent splash was made by Disney, the wholesome family-oriented company that invested $250 million in DraftKings, giving the daily sports fantasy company a valuation of $900 million. With $30 million in estimated revenue last year, that ought to make larger rival FanDuel worth close to $2 billion, given its $57 million in revenue. Their revenues make up the bulk of an industry in which an estimated $11 billion was wagered last year, generating $100 million in revenues. Adam Krejcik of Eilers Research sees that soaring to $1.3 billion in five years. Of course, Disney isn’t a total stranger to fantasy sports operators. They are big advertisers on the company’s ESPN sports networks. And Disney isn’t the only non-traditional player (read ostensibly anti-gambling enterprise) that has bought into the emerging industry. The NBA bought a stake in FanDuel last fall. The NFL has a promotional agreement. The NHL and a number of NFL teams have

Global Gaming Business MAY 2015

By Frank Fantini

deals with DraftKings. And Major League Baseball, the most puritanical of the leagues since the 1919 Black Sox scandal shocked America, has just signed an agreement making DraftKings its official daily fantasy game. The explosion of fantasy sports comes thanks to technology, including mobile devices, that enables daily betting. Obviously, it’s a lot more fun to pick a few ball players or golfers to perform today than to pick a team for an entire season. That allows for betting on each sport to increase by hundreds of times, and it allows for hundreds of new combinations, or, in total, an infinitude of betting opportunities. The result is good for the fantasy sports operators. But it also has dawned on the sports leagues that the heightened fan interest is good for them, too. If they get a cut of the action, so much the better. And in a world where TV audiences are fractured, sports is the one last broadcasting segment that is unified by the very nature of playing live contests. People want to see the game as it happens. That makes sports a huge revenue-producer relative to other kinds of broadcasting, and what’s good for TV revenues is good for America’s sports establishment, where broadcasting contracts now run into many billions of dollars. Thus, the merging of financial interests. Daily fantasy sports also blurs the lines of what is sports betting, what is legal, and how this plays into the apparently eroding opposition of the sports establishment to betting. The laws, definitions and court cases involving fantasy sports betting aren’t quite as clear as the oft-stated claim that there is a carve-out of fantasy sports in anti-gaming laws, though the cozying-up of the same sports leagues that are fighting to maintain the bans suggests they aren’t worried about the legalities. One of the arguments is that original fantasy sports—choosing teams for a long season— wasn’t gambling, but rather a game of skill. Picking three players to perform today is relying more

on chance than skill, thus more of a bet, critics say. However, Star Fantasy League announced that GLI had certified that its better players beat weaker players on daily NFL fantasy plays 69.1 percent of the time, and when Star Fantasy went further and did a partial weekly compilation, the best players won 99.994 percent of the time. That, Star Fantasy says, settles the question of skill vs. chance. So, if the leagues are business partners and the benefits of billions of dollars flow to them and to entertainment companies like Disney, you can bet fantasy sports is here to stay. And if fantasy sports betting is legal and widespread, the next foot to fall is likely to be out-and-out sports betting. Already, the walls are cracking with the new NBA and Major League Baseball commissioners saying the issue needs to be re-examined. Newspapers today write headline stories about the silliness of March Madness office pools being illegal. The internet has brought about a broader understanding of how sports betting exists elsewhere, such as in the U.K., with no harm to the integrity of their sports teams. And, what the heck, we’re already betting on whether my three guys will beat your three guys tonight in the Yankees game, so why not be allowed to bet on whether the Yankees will win? In a world where an estimated $300 billion to $500 billion is bet illegally on sports in the U.S. every year, legalized sports betting could be a several-billion-dollar revenue opportunity for casinos and state treasuries. In short, legalized sports betting isn’t about whether. It’s about when. And daily fantasy sports is about now. Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is available by calling toll free: 1-866-683-4357 or online at www.gaminginvestments.com.

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2015 Macau Special RepoRt

MACAU

IN TRANSITION Chinese and Macau government officials urge the gaming industry to diversify BY ROGER GROS

hree years ago it would have been unthinkable. The rapid, prolonged and steep decline of gaming revenue in Macau has surprised everyone involved. Casino executives there have always acted on the “build it and they will come” principle. After all, Macau had only just begun to scratch the surface of the Chinese market with a penetration of less than 2 percent. Sure, there had been some bumps in the road when the government would restrict travel visas or crack down on China Pay, the ubiquitous national credit card, but they always loosened up. Analysts and officials are clear: the gritty gaming capital of Asia needs to extend its attraction beyond just casinos. Rooms, food, entertainment, shopping... All need to be part of the solution. But with an image more like Atlantic City than Las Vegas, Macau has had trouble convincing the mass market that there is more than just gambling. So the crackdown on corruption in China has had a seriously negative impact on the Chinese “Special Administrative Region.” And with an explosion of huge new resorts in the Cotai section of the city poised to open, continuing confusion about the government’s (both Macau and China) attitude toward gaming, and rising competition from other Asian jurisdictions, the uncertainty of the city’s future lies heavy on the balance sheet of the casino operators. David Bain, the principal gaming analyst for Sterne Agee, believes the corruption crackdown is the principal reason for the Macau slump. “The decline in gross gaming revenue has been lower spend levels per visitor as a result of mainland China’s anti-corruption campaign. The anti-corruption campaign has caused a chilling effect to high-end China gamers,” he says. Grant Govertsen, the Macau-based analyst for Union Gaming Group, says there are many reasons for the slump, but “we believe the biggest driver of the decline in GGR in Macau is that behaviors have changed dramatically owing to political considerations, namely the anti-corruption drive which has resulted in a large number of players self-selecting themselves out of the market.” Hardest hit has been the lucrative VIP market, which until recently comprised 70 percent of gaming revenues. Private businessmen, public officials and

Global Gaming Business MAY 2015

“connected” individuals who were courted by junket operators suddenly lost their taste for gambling if it meant maintaining a high profile in a suddenly riskaverse society. “Those with strong financial resources feel Macau is a risky travel destination,” says Bain. “The anti-corruption campaign does not just transcend to Macau; some mainland contacts cite entrepreneurs even taking their personal names off restaurants to keep a low profile in the current climate. This is often viewed in China as an ‘anti-extravagance’ campaign. It is damaging to the VIP and high-end premium mass wagering in Macau.” Junket operators who once had a sweetheart deal with Macau regulators have come under greater scrutiny, and many have fled the market. Fancy rooms built specifically for these operations stand vacant in many Macau casinos. The premium mass market, the potentially more lucrative business targeted by the new Cotai resort, has also shrunk as participants in that segment also seek to stay under the government’s radar. Macau Chief Executive Fernando Chui Sai On reiterated what Chinese President Xi Jinping said last December: Macau must diversify quickly from just gaming. But the vaunted non-gaming attractions in Macau have also failed to achieve the traction necessary to bring in the groups, tours and conventions that will decrease the resort’s dependence on gaming. While many of the world’s most prestigious brands have outlets in Macau, catering to status-conscious Chinese, shopping has been something of a disappointment. Ditto the convention business, despite a dearth of meeting space in neighboring Hong Kong. Entertainment has been hit or miss ever since the opening of Sands Macau, which quickly closed its showroom after opening in 2003. The development of nearby Hengqin Island has stuttered. Promised theme parks, luxury resorts and educational facilities have been slow to come to fruition, even though several casino operators have pledged to build non-gaming resorts there.

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Chui called it the “new normal” in Macau. The city is under orders from Beijing to eliminate graft and corruption by high rollers, and to diversify its economy beyond gaming, which has historically been responsible for up to 80 percent of government revenues. Chui said the government will look at eight factors during a midterm review of the Macau economy, which will include a strategy for renewal of gaming licenses that will begin in 2020. They include the impact of a resort on the local economy, the impact on the local job market, the “interaction between the gaming and non-gaming sections of the gaming industry,” the level of adherence to their gaming contracts, the business’s corporate responsibility and the overall success of the business. Chui said he is “cautiously optimistic” about the future of the industry. “Why have I said that we are optimistic about the gaming industry? The main reasons are huge development projects in Cotai, due to be completed on schedule, (and) the number of visitors continues growing. In 2014, there were a recorded 31.5 million visitors. New product has always driven visitation to Macau, and so, will the flurry of openings of new resorts that will commence this month with the launch of phase 2 of Galaxy Macau be enough to stem the revenue decline? A lot depends on the allocation of table games to each property. The growth formula outlined by the government several years ago doesn’t seem to accommodate all the new casino space. But even if it does, will there be enough qualified workers to staff the games, since the government demands jobs be held by native Macau residents? “The figures show that the city’s tourism and gaming industries are still competitive and they are already equipped to face the challenges ahead… We are optimistic about and confident in their development,” Chui said. Is the crackdown in Macau forcing Chinese gamblers to get their fix away from the prying eyes of public officials? The jury is still out on that. “There is evidence that Chinese VIPs are increasing travel to other regions to gamble,” says Bain. “We have seen an impact primarily with the Philippines to date. However, these types of territories are nowhere near the scale of Macau. They do not have the same critical mass, infrastructure, cultural and language similarities that Chinese visitors to Macau have come to enjoy. We do not expect a small trend to new country gaming alternatives, such as the Philippines, to be overly disruptive for Macau gross gaming revenue over time. “Junkets play a role in travel and hotel arrangements, and credit extension in particular, at venues where it is legal (not Singapore, etc.). Our contacts also suggest junkets have conducted an increased amount of phone wagering in the Philippines from China, though it is small, as many Chinese players are slow to trust the Philippine phone gaming system over Macau at this point.” Govertsen says gamblers seem to be laying low at this point. “As we speak with junket operators, we get the sense that the desire to gamble has not declined within their customer base. However, a very large number of these customers are sitting on the sidelines entirely and are not willing to gamble anywhere these days. A smaller subset seems willing to travel overseas to gamble, including such destinations as the Philippines, Cambodia, Australia, Korea, etc.” According to Galaxy Deputy Chairman Francis Lui, the new products will create new interest in the market. “I believe we will gradually see a recovery in the second half of this year; I’m not worried about whether there is any massive structural problem,” Lui said, after Galaxy earnings plunged 25 percent in the fourth quarter. He said the company “won’t change its long-term business strategy in the midst of business cycles. “Our investment is trying to provide a full range of choices for the people going to Macau,” Lui added. “In the past, resorts would only focus on the gaming aspect, but now the resorts will be more a destination for holidays that is not only for gaming. We are moving into a new era.”

Top10 Reasons for Macau Slide

by Grant Govertsen Union Gaming Group last month issued a report explaining the multiple reasons for the recent downturn in Macau. Here are the top 10 reasons that gaming revenue continues to decline in Macau:

❶ Anti-corruption By a wide margin, we believe China’s anti-corruption crackdown has had the greatest impact on GGR over the last 12 months. In fact, the severity of the anti-corruption drive was the primary driver of our downgrading the entire sector in early June 2014. Whatever the reason behind the anti-corruption crackdown (e.g., a true effort to stamp out corruption, or a consolidation of power), we believe it is fair to say that the crackdown has exceeded nearly all expectations in terms of its depth and duration. Given the nature of China’s political system, and how people behave within its framework, it is not surprising that VIP growth fell off a cliff in spring 2014. On an almost overnight basis, a notable segment of the VIP customer base self-selected themselves out of the market, as they would have deemed their continued presence in Macau to not be worth the risk. Based on GGR data over the course of 2014, it seems to us that the run-rate decline of 20 percent to 30 percent was primarily attributable to those individuals who stopped coming.

❷ Junket liquidity, M&A, various rumors Dovetailing with and exacerbating the effects of the anti-corruption crackdown is the impact of declining junket liquidity. As the anticorruption drive was heating up, there were rumors of junket agents absconding with investor funds. The anti-corruption crackdown had the effect of causing some junket investors to similarly pull money out of the system. In addition, and either due to real financial distress or just taking advantage of a bad situation, some number of VIP customers slowpaid the junkets on losses, which (at least temporarily) took money out of the system. All three of these issues resulted in liquidity leaving the system, which in turn would have slowed down the velocity of money in the system and resulted in lower rolling chip volumes. In addition, we believe that ongoing junket M&A likely caused some junkets to operate more conservatively than normal, which also had a negative impact on volume.

MAY 2015 www.ggbmagazine.com

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2015 Macau Special RepoRt Known as the Umbrella Revolution, the Hong Kong protests began in September 2014 after the Standing Committee of the National People’s Congress (NPCSC) came to a decision regarding proposed reforms to the Hong Kong electoral system.

❸ Hong Kong protests—perhaps the most under-appreciated factor driving GGR down Only two items on our checklist seem to have had a negative impact on all three customer segments. The Hong Kong protests are one of them. In addition, we believe the Hong Kong protests are under-appreciated by investors in terms of being responsible for the further leg down in GGR trends in October—for both VIP and mass. The Hong Kong protests resulted in some number of persons either explicitly excluded from visiting (e.g., those traveling as part of a tour group to Hong Kong or a joint trip to both Hong Kong and Macau) or resulting in some incremental segments of the premium-mass and VIP populations self-selecting themselves out of the market due to incremental political considerations. Quite simply, we think the whole region simply became “too hot” given the exceptionally sensitive political ramifications of the Hong Kong protests (which, we believe, is tough for some Western investors to digest), and as a result a number of people—who heretofore did not feel like they were at risk due to the broader anti-corruption crackdown— suddenly stopped coming.

❹ Proxy (tele) betting In late October, one U.S.-based operator instructed its junkets that proxy betting (placing bets via telephone) would no longer be allowed. We believe this was followed soon after by a market-wide directive that all such wagering must stop. Given the difficulty of enforcement, we believe that some amount of proxy betting is likely still occurring, although a fair amount has probably stopped.

❺ Broader economic slowdown Like the Hong Kong protests, we believe the broader economic slowdown in China was the only other factor over the course of 2014 that likely impacted all three primary customer segments. While we would defer to professional economists in terms of any outlook on greater China, we would note that such actions like the November rate cut by the People’s Bank of China (the first rate cut in more than two years) should result in greater liquidity in the system, which ultimately should have a positive impact on VIP and other high-net-worth customers.

➏ Transit visas There were two rounds of transit visa scares in 2014. An initial restriction on transit visa usage occurred on July 1, and made it marginally more cumbersome to use this method to enter Macau (in effect it forced persons to actually fly to a thirdparty country or risk being locked out of Macau for two months). We believe this action had the greatest impact on junket agents rather than on any of the three primary customer segments. Based on conversations we had with VIP operators, some agents were avoiding Macau and taking their customers to other jurisdictions (Korea, Philippines, etc.) as a result. 22

Global Gaming Business MAY 2015

❼ Recent visitation declines—yes, declines We believe there is a material disconnect between reported visitation and trends on the ground. Total visitation was reported to be up 8 percent YTD through November, including 11-plus percent in October and plus15 percent in November for visitors from all sources, and visitation from China plus-20 percent and 28 percent in October and November. As such, we believe the supposed decline in spend per visitor is much less meaningful than the simple math of GGR divided by the number of visitors would suggest. Clearly, spend per visitor has materially declined at the VIP level (as some of the big guys have stopped coming and therefore have skewed the numbers), but we believe the decline in spend per visitor at the mass level is much more benign.

❽ AML and background checks As part of its stepped-up anti-corruption campaign, we believe that the government is taking a harder stand on various financial issues, including anti-money laundering. This, in many ways, is related to the supposed increased supervision of UnionPay transactions. We’re not entirely sold on this, as the reality is that the government has always had a window into UnionPay transactions. If nothing else, the specter of increased AML checks has led to headline risk. In addition, certain parties involved in the VIP business will now have to submit to background checks to prove that they have a clean (crime-free) background. We believe that nearly all of those involved do have clean backgrounds, and likely only a handful of persons are truly at risk from being precluded from taking part in the VIP business.

❾ General “tough talk” In the weeks and months leading up to President Xi Jinping’s visit to Macau in late December, a handful of high-level PRC officials provided commentary on such things as Macau’s need to diversify itself, and that gambling on the part of government officials is a bad thing. Any and all such commentary was met with further negative pressure on shares. We would counter that the call for Macau to diversify is nothing new, and has been sounded time and again by government officials (and is a primary driver of all the non-gaming elements associated with the next wave of development in Macau). In addition, the negative commentary on overseas gambling was not targeted, in our view, at Macau, but primarily at Korea and other regional destinations that have seemingly preyed on Chinese customers in extra-legal ways. But, the reality is that these comments were bad at an especially sensitive point in time, and have been viewed by many as yet another reason to stay negative on Macau.

❿ Smoking ban Macau’s 11th-hour expanded smoking ban in early October drove already-low sentiment even lower. Instead of only banning smoking in all non-premium mass and slot areas, the government extended the ban to encompass all parts of the casino floor other than VIP. Subsequent to this action, many operators have reclassified premium mass as VIP, which seems to be mitigating any impact. The smoking ban has had a negative impact on both grind mass and slot machines, with slot machines paying a higher price. Grant Govertsen is managing partner of Union Gaming Research Macau.

W W W. ARUZEG A MI N G.CO M

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2015 Macau Special RepoRt

UPCOMING COTAI PROJECTS

Melco City of Dreams

Galaxy Macau

LVS Ventian

Galaxy Phase II

Four Seasons

MGM

Sheraton

Parisian

LISBOA PALACE

Wynn Palace

Holiday Inn

Conrad

Park

Melco Studio City

Nature Preserve

Company: SJM Architect: WATG Projected Opening Date: 2017 Cost: $3.86 billion Features: French-themed combination of art and architecture, with 2,000 hotel rooms spread across three hotels—Lisboa Palace Hotel, Palazzo Versace Macau and another luxury hotel brand that has yet to be announced; grand wedding pavilion; multi-purpose theater. Retail: 366,000 square feet Restaurants/Entertainment: 387,500 square feet Casino: 290,625 square feet

SJM Lisboa Palace

Macau Dome

Border Gate

Former Caesars Golf Course

Transportation Hub

Louis XIII

MGM COTAI Company: MGM Resorts (MGM China) Architect: Kohn Pedersen Fox (David Rockwell for retail and entertainment) Projected Opening Date: Late 2016 Cost: $2.6 billion Features: 1,600 rooms and suites with an “overthe-top” Mansion similar to the Las Vegas facility. A SkyLoft component, also as in Las Vegas, is included. Retail: The Spectacle, a retail and entertainment complex, designed by Rockwell, with brands like Chanel, Fendi, Gucci, Prada and Louis Vuitton. Restaurants/Entertainment: Over 85 percent of the space will be dedicated to non-gaming attractions. Casino: 500 gaming tables and 2,500 slot machines

GALAXY PHASE II Company: Galaxy Entertainment Architect: Steelman Partners Projected Opening Date: May 2015 Cost: $1.8 billion (total investment $5.5 billion) Features: Continuation of first phase; includes three new hotels, the world’s first all-suite RitzCarlton hotel, Asia’s largest JW Marriott, with over 1,000 rooms, and Broadway at Galaxy Macau (former Grand Waldo), which includes a 320-room hotel and a theater with 3,000 seats. Lots of non-gaming elements, including multipurpose arena for shows and exhibitions. Retail: The Promenade, with more than 200 new shops Restaurants: Around 50 from gourmet to fast food Casino: Undetermined amount of tables and slots

Global Gaming Business MAY 2015

THE PARISIAN

WYNN PALACE

Company: Las Vegas Sands (Sands China) Architect: Aedas Projected Opening Date: Early 2016 Cost: $2.7 billion Features: A scaled-down Eiffel Tower fronts a 3,000-room hotel. Retail: A shopping area will connect to the existing mall in the Four Seasons, the Venetian and Sands Cotai Central. Restaurants/Entertainment: Diverse offerings similar to neighboring projects

Company: Wynn Resorts (Wynn Macau) Architect: Wynn Design Projected Opening Date: Mid 2016 Cost: $4.1 billion Features: Floral theme, using flowers, water and light, with a “performance lake” fronting the hotel, containing 1,700 rooms and suites. A light rail station will stop in the middle of the lake with “SkyCab” gondolas transporting visitors into the hotel. Retail: Luxury stores Restaurants/Entertainment: Gourmet dining, highend shows Casino: Unique gaming spaces

STUDIO CITY Company: Melco Crown Concept Architect: Goddard Group Projected Opening Date: September 2015 Cost: $3.2 billion Features: The Art-Deco complex attempts to position this new destination resort as Asia’s newest entertainment capital. Two towers will house 1,600 hotel rooms and includes Asia’s largest Ferris wheel, the Golden Eye. Retail: The Boulevard, a 300,000-square-foot mall managed by Taubman Asia Restaurants: Everything from fast food to gourmet Entertainment: Digital ride, Batman Dark Flight, Family Entertainment Center focused on DC Comics and Warner Bros. characters, 5,000-seat Studio City Event Center, Studio 8 fully functional television studio, and more. Casino: 500,000 square feet of gaming space

LOUIS XIII Owner: Hong Kong entrepreneur Stephen Hung Architect: Peter Marino Projected Opening Date: Late 2016 Cost: $1 billion Features: Ultra-high end boutique hotel, featuring a 22-story, 236-room hotel (at a minimum of $10,000 per night), topped off with a 20,000-square-foot suite renting for $130,000 a night. Guests will arrive in a fleet of some 15 red Rolls-Royce Phantoms. Retail: A series of invitation-only boutiques that will offer luxury items such as jewelry starting at $1 million. Also expected to include such brands as Chanel, Louis Vuitton, Christian Dior and others. Restaurants: Private gourmet outlets, with catering available to individual suites Casino: 66 gaming tables with minimum bets of at least $700 (HK$5,000)

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

HOUSE ACT Famed magician Harary tackles Asia

amed magician Franz Harary has a new gig: impresario at Studio City Macau. When Studio City opens later this year, Harary will debut Franz Harary’s House of Magic, which has been conceived as an immersive experience “designed by a magician, for magicians.” Visitors to the new $40 million venue will be treated to new, large-scale magical illusions, including shrinking motorcycles, cars appearing from nowhere, and members of the audience being levitated and teleported to distant locations. “Our show is being designed to reduce adult audience members back to their days as children, recapturing that sense of wonder and awe we all had when we were very young,” Harary says. The show’s art director, Tim Delaney (the man behind Disneyland’s Tomorrowland) has designed a truly unique experience. Franz Harary’s House of Magic will be comprised of four theaters: the Illusion Laboratory, where guests can interact with magical toys, gizmos and illusionary gadgets of all shapes and sizes; the Paris Opera House, a French Nouveau-style theater featuring the world’s best classical magicians; a Middle Earth-style theatre, in which guests will feel transported to a beautiful, mystical forest right out of The Hobbit; and a Future Tech Mega Magic theater, which, through state-of-the-art multimedia technologies, will take guests on amazing odysseys through the human imagination. Harary is bringing the best to Macau. “During the course of the past 30 years, my magic has literally taken me around the planet and has introduced me to the world’s greatest illusionists,” he says. “Today, I am proud to announce that I will be bringing those incredible wizards to Macau, where they can showcase their art in a place.”

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

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2015 Macau Special RepoRt

REPLACEMENT VALUE

Can mass market play offset VIP losses in Macau? BY MATTHEW LANDRY

The independent impacts of the efforts to abolish corruption and smoking ban are difficult to identify. Smoking bans regularly have impacts ranging from about 7 percent (Holland in 2009) to approximately 20 percent (New South Wales in 2007-2008) with many in the 12 percent-to-15 percent range over the first year. While there may have been a small decline in demand based on economic uncertainty, for the purposes of this exercise we will attribute the recent decline in mass-market tables and slots to the smoking ban. The impacts of smoking bans typically seem to work themselves out over two to three years, and we’ll assume the same for Macau. It’s important to note that the Chinese economy continues to expand rapidly. It’s the envy of many Western markets, where 7 percent growth would be welcome. While the economy may have its challenges, we assume that strict controls and oversight will support strong growth. (For example, decoupling the renminbi’s unoffical peg to the rising U.S. dollar would stimulate subsantial growth.) The current expansions on Cotai targeting mass-market play will add the capacity necessary to facilitate greater visitation, including hotel rooms, restaurants and other amenities that enhance the visitor experience. An increase in table games beyond the cap also will be critical to expanded mass-market visitation. The increase will bring in more mass-market players and help to diversify revenue streams, so hopefully, the government will permit the expansion. Coupled with continued infrastructure improvements, visitation to Macau should be able to grow. There is a chance for further constraints on growth, such as limiting visas, and those constraints could undermine these estimates. So how much mass-market demand will exist in the coming years? The number of affluent households in urban areas of China is expected to increase from 11.4 million today to 19.7 million in 2020, an increase of 73 percent. These households don’t likely map exactly one-for-one to VIP guests, but it’s a fair estimate. The number of upper-income households in urban areas is expected to grow from 44.3 million to 167.2 million, an incredible increase of 278 percent. This equates to a compounded annual growth rate of 27 percent. Some of these households are in the top 10 percent based on 2Q2014 3Q2014 4Q2014 income, but overall they will make up the bulk of the middle class and 51 percent of all households. 54,643 46,771 46,059 These households are a reasonable indicator for 32,624 32,337 26,388 mass-market play. Low- to middle-income house3,621 3,747 3,133 holds in urban areas are expected to shrink to 118 90,888 82,855 75,580 million, and poor households to shrink even more dramatically. In short, and when combined with other devel-5.8% -19.1% -29.0% oping countries such as India, we are witnessing the 32.4% 16.2% -16.1% most dramatic economic migration in history. As3.8% 5.4% -16.8% suming the government’s efforts to improve social 5.5% -7.1% -24.5% services and encourage greater consumption are

rom the gaming industry’s perspective, perhaps the saving grace of Macau’s declining revenue is that it is largely self-inflicted. Not on the operators’ part, but in that man has brought this upon himself. In other words, the government’s anti-corruption campaign, smoking ban and other contributing factors referened in this special report do not undermine the long-term viability of the market. However, the effort to bring earnings back to previous highs falls on the operators’ shoulders. They’ve focused on mass-market play for some time now, driven by higher margins. A major factor contributing to those margins is that mass-market play does not require commissions, which are approximately 40 percent of VIP revenue. This implies that a recovery in earnings does not require a recovery in revenue or its VIP component, an important point that may be lost on the broader stock market and its current disposition to sell operators’ stocks. The decline in revenue observed in the first half of 2014 was largely due to the crackdown on corruption being undertaken in mainland China. The decline, while substantial, was largely limited to VIP revenue. The overall impact was significant because VIP revenue was about two-thirds of total revenue going into 2014. This was down from about 73 percent in 2011, largely due to growth in China’s middle class and the industry’s marketing efforts targeting this segment. A second factor contributed to a decline in revenue during 2014 as well. On October 6 of last year, the smoking ban on main casino floors was implemented. In the final quarter of the year, both mass-market tables and slot machine revenue declined by approximately 16.5 percent. The decline in VIP revenue also accelerated, although there was not yet a smoking ban in VIP gaming rooms. Smoking restrictions are currently being considered for VIP rooms. Another factor that may have contributed to the decline is consumer sentiment and concerns about the Chinese economy. It’s important to note that this is a large and underpenetrated market with a rapidly expanding economy, so this final factor may not be a large contributor to the observed declines shown in the table below.

Recent Macau Performance 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014

Revenue (Million MOP) VIP Tables Mass Tables Slots Total Win

57,815 23,897 3,572 85,284

58,026 24,647 3,490 86,163

57,794 64,888 65,062 27,836 31,463 33,194 3,556 3,766 3,943 89,186 100,117 102,199

9.8% 30.4% 8.0% 14.8%

11.2% 30.0% 6.2% 15.8%

13.0% 37.3% 12.9% 19.6%

Change (%) VIP Tables Mass Tables Slots Total Win 26

Global Gaming Business MAY 2015

18.3% 39.9% 7.5% 23.9%

12.5% 38.9% 10.4% 19.8%

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WE’VE BEEN ON A

The current expansions on Cotai targeting mass-market play will add the capacity necessary to facilitate greater visitation, including hotel rooms, restaurants and other amenities that enhance the visitor experience.

successful, we will continue to see an amazing shift in China’s economy and consumption. With a low cost of living, growth in disposable incomes will drive growth in consumption, and the growing middle class will purchase goods and services including increased discretionary spending on things like entertainment and gaming. In other markets, approximately two years have passed for gaming revenue to return back to levels witnessed prior to a smoking ban. This implies that revenue would return to 2013 levels (the year prior to the smoking ban) in the last quarter of 2016. After that point, the analysis assumes growth based on recent historical levels for slot win and 20 percent for mass-market table play. This discount to the 27 percent growth forecasted for upper-income households was made in an effort to be conservative. It is possible that growth exceeds this level for a number of reasons. These include the opening of more properties on Cotai and the likelihood of some VIP players moving toward the premium mass segment due to the crackdown. This mass-market play on slots and tables has higher margins, and does not have to offset the decline in VIP revenue on a one-for-one basis to drive similar earnings. Based on those higher margins, the earnings attributable to one pataca in VIP revenue requires about 0.44 pataca of mass-market play. For this exercise, a 40 percent decline in VIP revenue was assumed in 2015. While the decline may seem excessive, it is consistent with what little data we have available for 2015 at this point, as well as the statements made by public officials and several analysts’ estimates. Thereafter it is assumed that VIP revenue will grow at 5 percent annually over the forecasted period. This is well below all but the gloomiest of forecasts for GDP to account for the potentially slow uptake in play following a concerted effort by the government. These assumptions drive an estimated gross gaming revenue of nearly 310 billion pacatas in late 2017 or 2018, with mass-market play on slots and tables comprising approximately 55 percent of the

total. While this estimate falls short of 2013’s 361 billion pacatas, the greater profitability of the massmarket segments is expected to lead to a similar earnings level. This assumes that casinos can shift operating strategies and efficiently serve the mass market. So, what other critical elements could shift this estimated recovery in earnings? First and foremost has to be further government intervention. For example, initiatives to curb visitation or implement smoking bans in VIP rooms would impact these estimates. Next, a significant decline in the Chinese economy could impact these growth assumptions, and would likely lead to slower growth. Even slowed growth may lead to a decline in consumer sentiment. If additions to supply or infrastructure improvements were not to continue, it would likely be difficult to facilitate a large influx of mass-market visitors. Operators currently skewed toward the mass market are best positioned to weather this storm over the near term. Las Vegas Sands’ extensive Cotai operations are among the most diversified, successfully attracting mass-market play and earning the lion’s share of non-gaming expenditures in Macau. In addition, Galaxy and Melco Crown have existing facilities targeting mass-market play on Cotai, and additional supply opening this year that should help them maintain profitability. As these and Macau’s other three operators open new properties on Cotai, the market will evolve. These openings should be well-timed with the continued growth in the mass market. Market share and earnings would probably shift over this time period and likely lead to a return of the lost market capitalization attributable to the recent decline in Macau-centric stocks. With many trading at approximately 50 percent of their value one year ago, picking out those that will benefit from the newly forming market could make you a winner. Matthew Landry is the managing partner of Strategic Market Advisors.

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2015 Macau Special RepoRt Baha Mar in the Bahamas was largely funded by the Export-Import Bank of China and built by China State Construction Engineering Corporation

STACKING THE DECK Is China gaining influence through gaming investments? BY DAVID RITTVO AND STEPHANIE ADKISON

s China continues its internal economic growth and social reforms, it is also looking abroad for investment and strategic geopolitical opportunities. There is a notion that China is investing both directly and indirectly in largescale projects, including leisure and hospitality developments, to influence its foreign policy to highlight its presence on the global stage. These large-scale investments have included straight infrastructure projects (i.e., airports or highway developments) as well as very large leisure and hospitality developments, many linked to the valuable outbound Chinese tourist market as a source of demand. In the past two years alone, China has been intimately involved with at least two major leisure and hospitality developments that have included casinos in the Bahamas and Jamaica. While it might not be surprising that both Chinese public and private ventures are the funding sources behind some major gaming destinations, it is intriguing to see what is happening beyond the walls of the integrated resorts (IRs) in these regions, and why. In addition to the entertainment zones that are being created, the projects’ investors are also funding infrastructure improvements and natural resource programs for the regions. While these types of enhancements are undeniably mutually beneficial to the region and the investor, there may be more to it than meets the eye when examined from a political point of view.

GAINING INFLUENCE Although there are individual Chinese investors anxious to jump at the opportunity to fund a potentially profitable gaming investment, several governmentbacked Chinese banks also are eager to invest abroad. The Export-Import Bank of China has provided significant loans to IR projects in countries like the Bahamas, and the China Development Bank means to do the same in funding a major resort in Jamaica. These opportunities are not limited to banks, as the state-owned China Poly Group Corporation, a massive real estate and natural resource development firm, seems to be expressing interest in an IR project in Australia. With the increasing exposure of the Chinese government behind the scenes of 28

Global Gaming Business MAY 2015

Jamaica’s Harmony Cove could be the country’s first integrated resort with backing from a Chinese bank

gaming destinations, it can be surmised that there is a longer game plan and political strategy in mind underpinning these decisions. In addition to realizing the financial benefits of these investments, the government may also be seeking to expand political and economic influence around the world. With the ownership of two of China’s largest airlines, the government not only has the ability to control flights within its own airlines, but also to strongly encourage other airlines to cancel flights, as it did in 2014 when anti-China riots broke out in Vietnam. Given the government’s control over the outbound travel of Chinese nationals, regions whose economies highly benefit from Chinese VIP players, such as Australia, could face financial distress if China decided to limit outbound tourism to that region. This gives the Chinese government a leverage to influence governments within the regions where its investments are housed. China’s government is not only politically strategic in its investing, but also economically tactical in leveraging investments. Through large-scale investments in new markets, China can also capitalize on parallel opportunities such as natural resource extraction and construction contracts. By maintaining an influential investment presence in Australia, one of China’s leading trade partners, for example, it can ensure the continued supply of natural resources. Also, a common contingency in Chinese governmentfunded projects is the required use of state-owned construction companies. This requirement not only provides efficient economics for these jobs, but also guarantees revenue to China’s economy.

BENEFITS WITH A CATCH As the Chinese government is increasing its exposure in major gaming destinations, it is taking a substantial position in both leisure assets and supporting infrastructure. The Innovation Group has explored this emerging trend in search of an underlying political economic strategy. For over a decade, the Chinese government has been funding infrastructure and natural resource projects from Central Asia to thousands of miles away in South America. By funding the most basic natural resource development and infrastructure needs, China is postioning itself to exert significant power to con-

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2015 Macau Special RepoRt trol within beneficiary nations. In Central Asian countries, investments in natural resource programs have been the most common type of government aid provided by China. Specifically, the Shanghai Cooperation Organization (SCO), an intergovernmental organization headquartered in Shanghai, has been a major facilitator in the pledging of these funds to Central Asia through its role in increasing multilateral trade between the two regions. In 2011 alone, the Chinese government pledged almost $8 billion to the SCO Development Bank, most of which was put toward investing in oil, natural gas and mining programs, as well as basic infrastructure projects throughout Central Asia. This approach has also brought Chinese influence into the Caribbean and Latin America. In 2011, the government-backed Export-Import Bank of China (Exim) loaned $43 million to Antigua and Barbuda to construct a power plant on the island of Antigua. Other regions have received funding from China to build or upgrade transportation and related infrastructure. In some cases, such agreements have been to construct high-speed railways or to upgrade or expand international airports to accommodate Chinese aircraft. China Railway Construction Corporation (CRCC), the second-largest stateowned construction company in China, won the contract for a $3.75 billion railway in Mexico in November 2014. This contract was revoked, however, due to concerns that the Mexican partners in CRCC may have had inappropriate political ties with government officials. Following the cancellation of the railway contract, Mexico announced its interest in receiving funding from China for an $11 billion airport to be built in Mexico City. Although Chinese officials have not released a formal statement regarding this project, it has been speculated that China is interested in the investment.

GAMING GROWTH Despite the fact that the Chinese government has been funding natural resource programs and infrastructure in international gaming destinations for years, it has only recently expanded the portfolio to include gaming and leisure projects as investments. Although government-backed banks have been the main source of this financial support, other state-owned entities are also expressing interest in these types of investments. The most notable government-backed investor is Exim, which funded over 70 percent of the Baha Mar development in the Bahamas. This $2.5 billion loan, however, came with a contingency: the project must hire a Chinese construction company. The chosen general contractor was China State Construction Engineering Corporation, which also contributed $150 million as a state-owned investor. The proposed Harmony Cove property, which is in the running to be one of Jamaica’s first integrated resorts, had been in talks with Exim for approximately two and a half years before the deal was dropped due to the Jamaican government’s reluctance to agree to a sovereign guarantee on the loan. Since then, Harmony Cove has been rumored to be in talks with other Chinese investors that will not require a sovereign guarantee, in particular the China Development Bank. If the loan is secured, China may realize the benefits of having influence in the Caribbean through its partial ownership of two major integrated resorts. In addition to the state-backed banks, government-owned corporations such as China Poly Group (CPG) are expressing interest in gaming and leisure investments. CPG has over 20 years of business history with Tony Fung, developer of an IR in Cairns, Australia. Although it is not yet confirmed, CPG President Zhang Zhengao was among several potential investors who were flown to the project site in Cairns last August. Another area where China can demonstrate influence is the tourism industry, which can be achieved through deploying government-owned airlines in emerging tourist destination markets and simultaneously placing controls on outbound 30

Global Gaming Business MAY 2015

Chinese tourism, an important source of demand for many projects. To exert influence in air service, China can leverage its majority ownership of two key Chinese airlines: Air China and China Eastern Airlines. Inbound tourism from China, especially VIP gamers, is crucial to the overall economy, for example, in parts of Australia. If the Chinese government were to curtail flights to Australia, tourist spending and employment could be put at risk. A threat could soon take shape in the Caribbean, as China Eastern Airlines is currently assessing the viability of offering direct charter flights to the Bahamas, which could bring several high-value Chinese tourists, investors and gamers to the region. In the Bahamas, there is even greater vulnerability if tourism development becomes dependent upon Chinese visitors, as the Bahamas government does not have a national airline that could accommodate shortfalls. Another example of air-service-related influence by China occurred in the summer of 2014 when anti-Chinese riots broke out in Vietnam. Dragonair, owned 30 percent by Air China, canceled 23 return flights to key Vietnamese cities after China issued an advisory regarding the risk to public safety in Vietnam. Additionally, and as a matter of policy, current regulations in China limit outbound group tourist departures to countries that have Approved Destination Status (ADS). According to the Chinese National Tourism Administration, there are 117 countries that have been granted ADS as of 2014. In addition to being able to control where its citizens can visit, the government currently has restrictions on how much cash can be taken out of the country by Chinese nationals. At this time, the amount is equivalent to US$50,000, but this can be modified at the state’s discretion. This restriction mainly affects Chinese VIP gamers and the countries which these players frequent.

BRING HOME THE BUSINESS China can also leverage its international investments to fund projects that more directly benefit its own economy. As covered earlier, it is common for project funding from China to include a contingency that a state-owned Chinese construction company be retained for the project. This was the case with Baha Mar, which currently stands as the largest project of its type to be fully developed and partially owned by a Chinese company outside of China. The $3.4 billion development required the importation of 8,000 Chinese construction workers, who most likely sent the majority of their wages back to their families in China, stimulating the economy from abroad. China also has the ability to enhance its internal economy though its influence on trade agreements with countries such as Australia or Laos. Australia, as a major supplier of raw materials to China, can be persuaded through China’s ability to ensure continued trade and/or provide favorable shipping conditions. In another example, there is a recent agreement in which China will loan $7.2 billion to Laos to construct a high-speed railway that would connect the two countries for trade benefits. This railway would be part of a larger rail link proposal that would connect China, Laos, Thailand, Malaysia and Singapore and could open many doors for trade among the countries. Using government-backed banks and other state-owned corporations, China has clearly been able to invest in diverse international infrastructure projects, natural resource programs, and gaming and leisure developments, and while doing so, exert its political and economic influence. Through its foothold by funding and feeding demand for these investments, whether far away in the Caribbean or in nearer markets like Laos and Australia, China will be inextricably linked to the global economy and political landscape for decades to come.

David Rittvo is executive vice president, international of the Innovation Group. Stephanie Adkison is an analyst with Innovation.

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Unrestricted support for UNLV provides unique educational opportunities for our students. Our mission is to provide the highest standard of care in a safe, efficient and compassionate manner. With a skilled, educated and experienced team utilizing the best technology available, our continuing goal is to improve the success of our referring doctors in achieving our patient’s whole body health. It is our honor to support UNLV’s accomplishments through the years and we look forward to a continued partnership. Anthem Periodontics and Dental Implants Members of the UNLV Academic Corporate Council

Academic Corporate Council members support UNLV through Annual Fund gifts of $5000 or more. Above Marketing Group Anthem Periodontics & Dental Implants Arnold Palmer Golf Management BACKBAR USA Bank of America Nevada Barrick Gold of North America BNY Mellon Wealth Management Boyd Gaming Cashman Equipment Company CB Richard Ellis CenturyLink The Coffee Bean & Tea Leaf Command Global CORE Construction The Cosmopolitan of Las Vegas Cox Communications Credit One Bank Desert Cab Dignity Health Ferraro’s Italian Restaurant & Wine Bar Fleming’s Steakhouse (Town Square) Fogo de Chão Las Vegas Four Queens Hotel & Casino

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2015 Macau Special RepoRt

FIVE QUESTIONS Grant Bowie President & CEO, MGM China

he new MGM Cotai resort in Macau promises to be one of the gems of that region. With amenities specifically designed for the Chinese customer, Grant Bowie, the president and CEO of MGM China, is taking the knowledge accumulated at the MGM Macau location and transferring it to Cotai. While Bowie believes change has been endemic in Macau since the launch of expanded gaming, he’s confident the SAR will be able to surmount the recent issues and evolve into something new and better. To hear a podcast of the full interview, visit GGBmagazine.com. What do you believe is the principal reason for the decline in gross gaming revenues in Macau?

I think there’s a combination of reasons. The last two years we’ve seen astronomical growth and we all knew at some time the growth would slow. There’s no question that the transformation of China, both in economic terms and government oversight, is all having an impact on consumer confidence. Will MGM be able to replace VIP revenues with mass/premium mass business?

We’re starting to see that. The future growth in Macau gaming is quite clearly going to come from the mass market. And for us, that’s been our objective since we opened here. But we also understand that you have to respond and adjust to market conditions at all times. We all need to push harder to build our mass business. Do you believe the regulatory regime in Macau will become more stringent?

It’s been happening all along for us. The U.S. operators that came into Macau have seen that level of oversight. It’s a slightly different approach than Western regulations, but from our perspective, we run a global compliance strategy, so we do exactly the same in Macau as we would do anywhere. How much has the general decline in the Chinese economy impacted Macau?

With the changes in China, the first thing you always look at is consumer confidence. Because of the significant change that is taking place, the consumers, to a degree, are sitting on the sidelines, trying to work out where they fit into the future. A lot of our customers are private businessmen in China, so they are having to invest lots of time and money into their own business, not leaving much for recreation. Are you confident that you’ll get the allotment of table games you expect?

We’re confident that we’ll be able to gain the right number of tables and we’ll be able to operate successfully and effectively. Clearly, we’ve made an application to the government and asked for a specific number of tables. We need to pay attention to how the market is tracking, and I think we will get the tables we require, but it’s very unclear how that’s going to happen. We’ll look at our total gaming capacity and decide how to effectively deploy all of our assets.

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Big Data,

Big Results

New data sources take casino marketing and operations to the next level By Frank Legato

Data! Data! Data! I can’t make bricks without clay. —Sherlock Holmes, Adventure of the Copper Beeches t has been three decades since the first automated player tracking systems gave casino marketers information on who was gambling the most on their slot floors. That rudimentary accounting information created a new era of smarter casino marketing, with promotional spending based on empirical data rather than just the keen eye of a host. As computer technology has advanced over the years, so has the quality of the information available to casino marketers. But even Sir Arthur Conan Doyle, when creating that iconic Holmes quote in 1892, could not have imagined the volume of data that would become readily available in the 21st century to anyone willing to dig a bit. And to a casino, data is worth digging for. Any and all data about customers can lead to more efficient, effective marketing. And there is more data out there about customers and potential customers than ever before—with plenty of experts ready to help find, mine and use that data. The casino industry has entered the age of big data. “Big data,” of course, is the latest tech buzzword—a broad term for data sets so large or complex they can’t be managed using traditional data processing techniques. Retrieving, researching and analyzing big data for the specific needs of a client has become a new and growing sub-industry for data technology experts, and there is no shortage of demand for these services in the casino industry. “The big problem with big data,” says Eian Counts, vice president of product strategy for the Rainmaker Group, “is that the data can have a lot of advantages, but at the end of the day it really also needs to be smart—because not everybody can afford to hire a team of PhDs and data scientists to make sense of what all this data means.”

Global Gaming Business MAY 2015

Pricing the Room Rainmaker is one of the many boutique software suppliers helping gaming operators turn the mountains of data they have into mountains of revenue through smart marketing and strategic planning. The company’s GuestREV product helps gaming resorts decide the right room pricing and comp decisions based on data from profit centers throughout a resort. The idea is to ascertain what Rainmaker calls “Total Guest Value” using historical revenue data from gaming, food and beverage, nightclubs, spas and other profit centers. The software then applies forecasting and optimization algorithms to reach room rates and other decisions that will be most likely to result in profit for the enterprise. “A large portion of what makes a revenue management system excel is how solid its forecasts are,” Counts says. “The forecast is the heartbeat, the lifeblood behind a revenue management system. Of course, it’s absolutely critical that we include all the data we can to drive that heartbeat.” That means connecting the data dots among a variety of systems in place at a given casino. “It’s not good enough just to have those tools sitting in isolation,” says Counts. “Those tools need to be talking to each other, and they need to have open data communications and transfer—so, for example, GuestREV can make the right choices around which level or segment to accept based on data that exists in two, three, four or five other systems. That’s a huge challenge the industry faces in general.” The science of optimal hotel pricing was one of the first non-gaming areas to draw on multiple data sources to frame business decisions. With casino resorts in

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Las Vegas drawing more revenue from hotels and other non-gaming areas than from the gaming floors, casinos have called on companies that produce relevant software and double as consultancies on how to best apply the technology— companies like Rainmaker, or Duetto, the San Francisco-based firm founded in 2011 by former Wynn Resorts business strategy executives and one tech veteran. The executives—former Wynn Director of Enterprise Strategy Marco Benvenuti and Business Strategy Director Patrick Bosworth—founded Duetto Research with Craig Weissman, former chief technical officer of Salesforce.com. Duetto specializes in hotel pricing strategies based on data from a variety of separate tracking systems. “We connect with the property management system of the hotel, so we’ve got all the reservation information, group information, cancellations,” Benvenuti explains. “We also connect with the hotel website, so we are able to track folks who were looking for a room but did not buy one—we track lost business.” For the final decision on pricing and comps, the Duetto software connects

with the casino management system in place. “We basically are able to get, in an automated fashion, the value of each player who makes a reservation,” says Benvenuti. “Through the triangulation of all the data sources, we are able to physically forecast demand by player worth, and then decide how much to sell the room for somebody up the street versus how much to sell or give the room for free (to a loyal customer).” Benvenuti notes that the casino management system is crucial. “A CMS like Konami (Synkros), our preferred integration partner, actually collects every single data point from the different POS points.” The technology of linking those data points from myriad different systems has advanced rapidly during the past few years, Benvenuti says. “Slowly but surely, we were able to create robust integrations with all these different systems,” he says, “so that now, we’re able to serve a large portion of the market.”

New Tools, New Data There is a big push among casinos, and producers of the big casino management systems, to find new sources of useful customer data—and new ways of translating that information to the bottom line in the form of customer acquisition, retention and increased spending. The field of data sources that can be used by casino marketers and business-intelligence experts is growing all the time. Not coincidentally, the variety of new software available from different specialty firms provides tools to mine the big-data mountain, from records already with the casino to social media to public records. Companies such as Casino Data Imaging (CDI), Qualex, LexisNexis, DataSpade and SAS are expanding the universe of data being used by casinos to improve business results and gain new customers. All are companies that apply data-warehousing and CRM software to the systems that already

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GETTING SASSY

SAS has contributed to the evolution of player-based marketing hen examining the entry of big data into the casino marketing and business-intelligence functions, one name comes up more than most: SAS. Since it was founded in 1976, SAS—the original acronym stood for “statistical analysis system”—has helped clients in a variety of industries make sense of their data. Over the past three decades, though, no industry has benefited more from the company’s expertise than the gaming industry. SAS technology, for example, formed the basis of Total Rewards, Caesars’ groundbreaking and much-copied national player reward system. “The momentum (of big data in casinos) was really driven by Caesars’ success with the Total Rewards system,” says Kelly McGuire, executive director of hospitality and travel global practice for SAS. “When Gary Loveman came in and added that analytical radar, that’s when the casino industry really realized the value of all that data they were sitting on. Caesars really changed the game in the way we think about what a valuable player is.” Caesars, McGuire says, turned whale marketing into mass marketing. These days, SAS works with most of the big gaming players globally—and many of the very software suppliers looking to expand the data base available to operators. “Technology has really driven a lot of the innovations that are happening now,” McGuire says. “The technology infrastructure is facilitating access, and allowing people to do more and better things. With increases in process“There is more information ing power, with memory and data available than we’ve ever storage becoming a lot cheaper, it’s becoming feasible for casinos to store had to deal with before. more and more detailed data.” To effectively use it, you She says what marketers need to have to rethink the way develop is the ability to cope with you’re going to capture, what she calls the “three Vs” of big store and analyze it.” data—volume, variety and velocity. And the problem for casinos has —Kelly McGuire, Executive been the second two Vs. Director of Hospitality and Travel “There is more information availGlobal Practice, SAS able than we’ve ever had to deal with before,” she says. “To effectively use it, you have to rethink the way you’re going to capture, store and analyze it. “The velocity is a huge problem too. A tweet is stale five minutes after it is tweeted. If you don’t react to it by then, it goes viral and you’re done. Or it doesn’t, and who cares? And geolocation as well—you can’t change the billboard two days after I walked by it. Or two minutes. Because then it’s only creepy for the person in front of it.” She says the next step for casinos is to build the infrastructure to handle all this data. “Data becomes an opportunity only if you think of it in terms of what insights can help me improve my decision-making, if I can just get at it—and get at it at the speed of business.”

Global Gaming Business MAY 2015

are in place, increasing the marketing and BI capabilities within the existing system infrastructure. Software companies like CDI sometimes form partnerships with consultancies such as Qualex on business intelligence and data warehouse solutions. Qualex Asia and CDI have partnered to offer data solutions complete with mobile and social media platforms. “We are trying to help the casinos understand the value of patrons through every dollar they spend within the casino,” says Andrew Pearson, managing director of Qualex Asia. And outside the casino as well. Through use of social media and other tools, the CDI/Qualex solution uses data from the outside, from customer dining and entertainment preferences to the games played at other casinos, to players’ favorite sports teams. One of the best ways to get that information is by allowing customers to log in to the casino website using their Facebook identity or other social media account and password. Through the regular “likes” and similar actions, the casino can link to the customer’s Facebook posts. “You’d be able to associate anything they might be saying out in the social media world with his profile—if he likes a particular sports betting site or sports team, or where he’s actually spending a lot of his dollars—and associate that with particular marketing offers,” Pearson says. CDI is providing the platform for Qualex projects in Asian markets. “What our new platform does is access different data sources, and slice and dice the data, and display it in a dashboard,” says George Levine, sales and marketing director for CDI. “We try to customize probably a bit more than our competitors.” The rise of big data also has sent casino marketers far from the walls of their land-based casinos in the quest to maintain timely, accurate profiles of their players. Where casinos once relied on knowing which of their players wagered the most inside their casinos, technology now provides real-time access to public records as an option to help make marketing and business decisions. Ohio-based LexisNexis Group has been a mainstay of law research since 1977, and its database of legal precedent has grown right along with technology in the computer age. The group also has grown in the types of data and records it provides to clients in various industries outside the legal realm. One of those is the gaming industry. Marketing provides the fastest-growing area where public data can make a real impact, says Yuri Cameron, director of market planning for gaming for LexisNexis Risk Solutions. He notes that his firm offers access to “a huge amount of data, going back decades.” The most basic need, of course, is for that data to help identify who a casino resort’s best customers are. Timeliness is crucial, Cameron says, and public records can reveal changing financial circumstances. Liens or judgments reflect financial crisis—or worse, problem gambling. On the other side, information as basic as a customer’s ZIP code can reveal, in one visit, a good opportunity to market to a potential high-end customer. “Say two customers each spent $500 in the past three months,” Cameron says. “If the ZIP code of one indicates he lives where property values are $10 million, obviously, you are only getting a small portion of that customer’s wallet.”

Connecting It All In the end, connecting the data dots is what all the specialty software firms contribute to casino marketing and BI. Many of them serve as third-party suppliers to complete the offerings of one of the big system suppliers like Scientific

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Games, IGT, Aristocrat and Konami. In that respect, each interfaces into the casino management system in place. Some, like Michiganbased DataSpade, do all the heavy lifting for casino marketing. DataSpade’s Bounceback software provides a turn-key loyalty system, using the mountain of data already in possession of the operator to tailor a complete profile of each player in a casino’s customer database. “The program we implemented identifies typical play levels for our players,” says Steve Neely, chief marketing officer for Tucson’s Casino Del Sol Resort, which enlisted DataSpade last fall to revamp its player marketing. “Then we translate the money they’ve spent into a language the player’s recognize, which is points.” This ready-made CRM program has helped Casino Del Sol make sense and use of its data. “We had access to the data before, but we were just not using it correctly,” Neely says. “They took our data, ran it through their program, and gave us back lists we uploaded into our player accounts… We uploaded it into groups. They looked at the play history, but differently than we did. “It’s a tool that you can integrate into your property if you don’t have the expertise, and certainly the time, on staff. I’ve been doing this for years, and what was different about this is that it was a program that had already been developed. I didn’t have to build it from scratch. They took a lot of the legwork out of it; it really was a full-service piece.” Connecting the data dots, of course, is also the main purpose of the casino management, CRM and BI systems from the big slot manufacturers. And whether through integration of third-party software or homegrown R&D, the big system suppliers are constantly modifying their offerings to tap into the vein of big data to improve their offerings. Scientific Games’ Bally systems, the leading systems in the casino industry, include a sophisticated customer communication tool within the iVIEW Display Manager bonusing system. Customers have raved about BOSS—the Beverage Order Service System, which not only lets players order drinks right on the slot screen, but stores each player’s drink favorites in the database. Press a button, and your top drink choices appear. But customer service is only the tip of the iceberg

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“People on social networks are sharing a lot of when it comes to ways Scientific Games has incorporated access to new data into its infrastrucpersonal information and preferences, and ture. “We’ve done the heavy lifting in recent capturing a lot of behavior that will allow you to years to make sure we interface to all the retail better know your customer. And the more you establishments—point-of-sale, hotel, race and sports book, the spa,” says Tom Doyle, vice know them, the more likely you are to put president of product management and complirelevant offers in front of them.” ance for Scientific Games. “Then we go to the next step, our Bally —Sina Miri, Senior Director of Project Management, IGT Mobile product. The customer now has a mobile application that allows them to do a whole laundry list of Scientific Games. “Those following the casino’s page can see that win, and can see different types of things on their that a lot of people are winning at this particular casino.” mobile device—make reservations The next big marketing advance, Brahmandam says, will come from geolocafor dinner, check on player club station technology. “Information on location has changed the way we live in the outtus, see what kinds of special events side world,” he says. “GPS has effectively changed the way we all live. We believe or promotions they’re eligible for.” that knowing information about players inside the casino using beacon technolBally has been at the forefront ogy is going to create a similar revolution, and change the player’s basic experiof customizing player benefits ence inside the casino.” through new data. Use of social Soon, personal messages from the casino to the player can take into account media and geolocation are leading to capabilities not imagined even five years ago. For instance, the iVIEW DM sys- the player’s exact location within the casino, and, combined with the improved and manageable data stream in the system, make relevant offers in real time—a tem at the Eldorado offers players the option to post big wins on the casino’s discount at a favorite restaurant, an offer of show tickets for a performer the Facebook page. “The player is given a choice—do you want to post this win on player loves, etc. “That’s where our products will evolve, and that’s what we’re Facebook?” says Kiran Brahmandam, vice president of systems development at

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working on,” says Brahmandam. There is no shortage of new data sources being tapped within the systems of the other top companies either. IGT’s Advantage system is constantly evolving, its API—the acronym means application programming interface—consistently gathering new capabilities. “A few years ago, we started enhancing the API to integrate partner sources of data,” says Sina Miri, senior director of project management for IGT. “We’ve gone to standard APIs, which companies like Google and Facebook are using.” Like others, IGT is experimenting with geolocation and beaconing technology. However, tapping social networks and social gaming—including IGT’s own successful DoubleDown social casino on Facebook—provides the most promising new data source, says Miri. “People on social networks are sharing a lot of personal information and preferences, and capturing a lot of behavior that will allow you to better know your customer,” Miri says. “And the more you know them, the more likely you are to put relevant offers in front of them.” Facebook authentication instead of email addresses for the casino’s website “gives the operator access to your social graph, and your ‘likes,’” says Miri. “That will tell you, for example, that I’m a soccer fan as opposed to a basketball fan. When an operator has that information, he can send offers that are relevant to you.” Angelo Palmisano, vice president of system products for Aristocrat Tech-

nologies, is pursuing similar new data sources for that company’s popular Oasis 360 casino management system. “From a marketing standpoint, the challenge has always been to have good data on what the customer’s total spend is,” says Palmisano. “What we’re looking at now is access to real-time hospitality spend, real-time F&B spend. Those are the outlets we’re focused on in the social space—real-time spend outside the enterprise itself. Customer behavior is our focus.” Aristocrat has the added advantage of a popular free-to-play platform it has created for several casinos, which provides more data for the Oasis mix. “We want to know what kind of games they play, how often they play, what else they look at when they’re propositioned during those games,” says Palmisano. “It’s about looking at their behavior and then looking at how to apply those behaviors to brick-and-mortar casinos.” If there is one thing everyone agrees on in the drive to tap into big data, it is the need for speed. “This is real-time data, and customers are getting access to it in real time,” Palmisano says. “What excites us most is the ability to look at overall customer behavior, irrespective of gaming, and having an automated process of rewarding those people with what you would call instant gratification. As they’re doing something, those customers are being rewarded.” “Our casino operators are looking for better and better ways to use the data,” says Scientific Games’ Doyle. “By connecting them to outside-the-walls data, income data and other demographics, you can take your marketing to the next level.”

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Using Social Media to Drive Traffic

t all started back in the old days, with a little startup called Facemash. In 2004, at the dawn of the social media era, a group of Harvard dorm rats launched the website with the lofty goal of deciding who on campus was “hot” and “not.” From that auspicious start, the site renamed Facebook has exploded into the most influential social networking website on the planet, with some 1.35 billion users worldwide (yup, approximately the population of China). These consumers now do the work of market researchers, they do it better, and they do it for free. “Facebook’s greatest trick was convincing people to volunteer all their personal details—their birthdays, whether they’re single, left-handed or Republican—all that seemingly innocuous information,” says Rich Sullivan, CEO of Red Square Gaming in Mobile, Alabama. “It traded people’s desire to connect with each other for all their personal information, which is now sliced up in nice little data buckets for advertisers to sell.” The success of Facebook has spurred a virtual army of social sharing sites and niche platforms—from Twitter and YouTube to Instagram and Pinterest, from WhatsApp and Snapchat to Vine, Vimeo and countless others. All of them can drive traffic to your business. But which ones are right for your property? How can you keep up with the constant rollout of new social platforms? Should you even try?

Fast and Furious “The pace is maddening. The problem is there’s a new shiny thing every other week,” says Sullivan. “You’re still playing with this week’s shiny thing when the next one pops up. And none of it is a silver bullet.” While Facebook and Twitter have stood the test of time, other channels that once were “hot” (think Myspace, Foursquare) now are “not.” In March, for example, the live-streaming video app Meerkat dominated the news for just a few days before being upstaged by a similar app called Periscope. The digital landscape is seismic, with upstart channels challenging the big boys and market share being split or redistributed among a growing number of competitors. Facebook, for example, is now so content-cluttered that it’s losing its power to provide organic reach (i.e., free marketing). Yet it’s also making headway in the video-posting market, which until now essentially has been owned by YouTube. “The misperception of technology and social media is that it’s free and we just need to have a Facebook page or put a video on YouTube and it will go viral,” says Sullivan. “But the organic reach for any brand’s page on Facebook is 40

Global Gaming Business MAY 2015

These days, there are countless ways to pitch your products online. But it all starts with knowing your customer, and telling a great story. By Marjorie Preston 1 percent to 5 percent.” So if you have a half-million Facebook fans and you post a photo saying Carrie Underwood or Steve Aoki is in the house, only 5,000 people are apt to see it.

Get On Your Soap Box Sullivan likens Facebook and other digital platforms to radio, which started out commercial-free, and then started selling soap (hence the term “soap opera”). “It is really turning into a hyper-targeted broadcast medium, if you think about it— a very modern technology that’s following in the footsteps of traditional media in the way it has monetized itself.” “In 2014, social became a pay-to-play type of place,” agrees Justin Cohen, president of Internet Marketing Inc. in Las Vegas. “The big story of 2014 rolling into ’15 is advertising, especially on Facebook. It’s become a necessity. That’s why Facebook stock is up from $18 to $85.”

Facebook Here are some stats about the world’s dominant social network: • According to a 2014 report from the Pew Research Center, 57 percent of all American adults use Facebook. • Sixty-four percent of Facebook users log on daily, and spend about 20 min-

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utes per visit. • The site’s reach continues to be multigenerational: More than 65 percent of millennials have Facebook accounts, along with almost one-third of U.S. senior adults. Seventy-three percent of kids 12-17 also log on. • Each user is connected to an average of 80 pages, groups or events, according to Facebook. Reach one user, and you’re indirectly linked to all of them.

• Half of YouTube videos are viewed on mobile devices. With skippable in-stream ads, there is no charge to the advertiser when viewers click through—even if they watch 59 seconds of a minute-long ad. “Thousands or tens of thousands of people could see most of your ad for free,” says Cohen. Of course, it’s even better when they stick around, so you’ve got to serve up memorable content.

For example: The MGM Grand Facebook page includes previews of the 2015 Billboard Music Awards and the upcoming Mayweather-Pacquiao fight, showcases the resort’s restaurants, spa, pool and hotel suites, and includes plenty of love notes from happy patrons. A QR code takes you to the MLife rewards program, and with another click you can plug into a myVEGAS slots app for a noncash gaming program that invites you to play on iOS or Android and level up.

For example: On the SLS Las Vegas website, a YouTube link takes you to videos of the iconic former Sahara during its $425 million renovation, with electric images and appropriately pulsing music, old-time videos of Sinatra from the Rat Pack days, and a video of the property popping the cork on New Year’s Eve.

YouTube As the second-largest search engine in the world after its parent company, Google, the video-sharing website draws 1 billion unique viewers per year and is one of the highest revenue-generating online advertising forums, says Cohen. YouTube pre-roll ads (those commercials that precede the video you want to watch) provide an almost-captive audience for 15 seconds, 30 seconds, 60 seconds and longer. Beyond stupid pet tricks, Sasquatch sightings and other video favorites, here’s why YouTube matters: • In 2014, viewers spent 1 billion minutes watching just the top 10 YouTube ads. And many of the winning ads ran for more than three minutes (hint: content is king). • A reported 80 percent of viewers remember the video ads they see online. • Eighty-five percent of adults around the world (excluding China) consider themselves regular YouTube visitors.

Twitter In 2006, when Twitter was launched, co-founder Jack Dorsey described its 140-character tweets as “short bursts of inconsequential information.” Though usage dipped slightly from 2013 to 2014, Twitter is not inconsequential if your goal is to reach a hip, informed millennial audience. Here’s more: • According to Twitter, the site has 288 million monthly active users. • An average of 500 million tweets are sent per day. • Eighty percent of active users are on mobile devices. • Though less than 60 percent of social network users in the U.S. are on Twitter, the channel is popular among younger educated Americans, and the average user has 208 followers. “There is less focus on advertising” on Twitter, says Cohen, “more focus on getting content out in short, concise ways. Twitter is a place where people will reach out and talk to you, and if you’re willing to listen or better yet to engage, your customers are there.”

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Channel Surfing For example: Along with Ladies Night drink specials, Mohegan Sun’s Twitter page recently touted an Amazing Race casting call and a free Tower of Power concert, sent birthday shout-outs to Eric Clapton and Kenny Chesney, celebrated the opening day of Major League Baseball, and talked up a special $2,500 cash giveaway on the casino floor on April 15, tax day.

Pinterest On this visual bookmarking service, users save images to virtual scrapbooks called pinboards. Populated mostly by women, Pinterest is not unlike a woman’s magazine with its emphasis on crafts, home décor, fitness, fashion, DIY and recipes. It remains a great way to reach a population that loves to share compelling photos and video, and also loves to shop. “Think of what we have going on visually in our casinos and restaurants—they could all be communicated through Pinterest boards,” says Cohen. “We could have 50 boards just for weddings.” • According to the latest numbers compiled in 2013, Pinterest has about 50 million monthly active users in the U.S., and 70 million worldwide. • Eighty percent of Pinterest users are women. • Pinterest gets more than 40 percent of e-commerce traffic, while Facebook gets 37 percent. • Three-fifths of Pinterest boards are related to dining. For example: Pinterest boards on the Borgata website offer recipes from the property’s celebrity chefs, so you can make Wolfgang Puck’s porcini mushroom pizza or Bobby Flay’s grilled brie and goat cheese and then “view it, share it, love it!” The site also recently offered five cocktail ideas for an Oscar viewing party.

Picture This There’s an old saying among creatives: “Show, don’t tell.” With the proliferation of photo-sharing and video-sharing technologies, that axiom has never been more true. Consumers have become accustomed to entertaining, engaging, sensory-rich messages. YouTube says the most shareable ads are those that “tug heartstrings and tickle funny bones.” But you don’t have to go viral to be effective. “How many people actually engage with your billboard?” Cohen asks. “If you told me a few thousand people a month watch my billboard and engage with it, I’d feel a whole lot better than hearing that hundreds of thousands of people drove by.”

I Spy Thanks to location-targeting programs like geofencing (which pinpoint people’s locations within a premapped or “fenced” geographical area) and beacons (which track people’s movements within a property), marketers and advertisers not only know who’s out there. They know where. “Everyone’s walking around with a GPS in their pocket, which is another kind of game-changer,” says Sullivan. Beacons serve as a sort of “souped-up Wi-Fi” that allows operators to identify a patron’s location—in the food court or buffet, at the spa or pool, in the shopping district—and deliver appropriate messaging. “It’s really about having a two-way communication, whether people are or aren’t in your house,” says Cohen. “You can talk to them about the poker tournaments, what DJ is in your nightclub… Long story short, you can focus on driving foot traffic to the mall, selling show tickets, getting heads in beds,” or promoting a poker tournament. Casinos are already testing live-streaming platforms to showcase that poker tournament in real time to people as they touch down at the airport or drive into town. That outreach will grow in importance as casinos try to “shift our clients from those who primarily gamble, people who are over 40, to the people we need to gamble, who are under 40,” says Cohen. “You have to resonate with them by communicating the way they want to communicate.” 42

Global Gaming Business MAY 2015

Q&A with Steve Callender, General Manager, Tropicana Atlantic City Which online channels do you use most to connect with customers? Facebook is where we

turn when we have media-rich content to share about past or future events. From a customer service standpoint, it’s easy to engage with people and address their questions. Twitter skews slightly male, Facebook slightly female. Twitter and Instagram skew much younger than Facebook. Any live event communications perform extremely well on Twitter, and we get a lot of viral, trackable benefits. How do you maximize social media to boost traffic? During peak times, we focus on capturing photos of the action to share with our fans. In the off-season, we get people thinking ahead with upcoming events. We take advantage of bad-weather days to drive guests to TropicanaCasino.com, where they have the convenience of playing from home. Our highest engagement comes from posts where we pose openended questions to start a conversation. Asking “What’s your favorite slot machine?” gets people debating and rooting for their favorites, therefore growing our reach. What engagement strategies have worked well for you? We often

feature user-generated content, encouraging followers to share pictures of their trips, their wins, their celebrations, like Winner Wednesday, where we feature user-submitted pictures of wins on the casino floor and online. How do you handle negative comments? A complaint, to us, is an

opportunity to identify and address issues and re-engage patrons who had an unsatisfying customer experience in some way. They learn that we’re listening, and our growth in both numbers and engagement tell us how much they appreciate it.

The Softer Sell It’s no secret you’re out to sell your experience and amenities, get heads in beds and feet on the casino floor. But these days you have to dial down the pitch. “We try to shy away from the promotion side, and when we are promoting, we try not to sound like we’re promoting,” advises Cohen. “If all we do is take the tactics we use in direct mail, which is 100 percent promotional, and try to translate that to digital, it doesn’t work. People want to see cool videos and hear about cool stuff happening. Share a recipe or show how to have a great poker night at your house. Think selflessly, not promotionally. Then they’ll pay attention.” Remember that all roads should lead to your home page. Originate all content on every channel from your website. “SEO (search engine optimization) is all about content, whether it’s infographics, videos, memes or contests,” says Cohen. “They all largely should live on your domain instead, and then you share it on social from there, so anyone who picks it up links back to your website.” But first and foremost, no matter what channels you use, tell a good story. Illustrate it with amazing images. Capture imaginations. Make ’em laugh. Or cry. As original “Mad Man” David Ogilvy wrote in his 1963 classic, Ogilvy on Advertising: “What really decides consumers to buy or not to buy is the content of your advertising, not its form.” It’s comforting to know that some things never change.

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iGAMING NORTH AMERICA

Ten Bold Political Moves, Part I What issues shaped iGaming in North America

as Vegas Sands CEO Sheldon Adelson’s war on internet gambling has sent shockwaves through Nevada, Delaware, New Jersey and everywhere else looking into regulating the industry. In Washington, D.C., however, Congress’ second go at the Adelson-backed federal Restoration of America’s Wire Act looks like business as usual. The rejuvenated prohibition movement has been stunning at times, but for internet gambling, there certainly has been no shortage of bold political measures taken over the years. Here’s a retrospective look at 10 equally bold iGaming policy moves taken since internet gambling emerged in the mid ’90s.

Virginia Congressman Bob Goodlatte 10. Taking it to the Banks The introduction of Rep. Jim Leach’s iGaming prohibition bill in 2000 was a defining moment for the evolution of the Unlawful Internet Gambling Enforement Act (UIGEA). Prior to that, critics lambasted previous prohibition proposals as unenforceable. Leach changed the game, however, by placing the burden of enforcement on the very influential—and not always agreeable— banking industry. Up to that point, the banks seemed content with their collective voluntary block on iGaming, but Leach’s UIGEA would have removed their discretion from the equation. It was not exactly the path of least resistance. The bill failed, and the funding language was shortly thereafter folded into the pre-existing so-called Goodlatte bill, restoring Rep. Bob Goodlatte’s position as the House’s champion for prohibition. But in the end, Leach’s proposal proved to be the genesis of the eventually successful UIGEA. 44

Global Gaming Business MAY 2015

By Mark Balestra

Senator Bill Frist 9. Fristing the Night Away (Version 1) After a decade of failed attempts to ban internet gambling, supporters of prohibition got the break they needed after Senator Bill Frist folded UIGEA into a larger, unrelated must-pass bill. When Congress passed the SAFE Port Act of 2006 late at night during a pre-recess crunch, many voters had no idea the UIGEA language had been written into the bill. It was not clear how or why Frist took charge of the prohibition movement, but cannot be ignored that he was at that time gearing up for a 2008 presidential campaign, which was to kick off in Leach’s home state of Iowa.

Senator Jon Kyl

duce legislation to regulate—rather than prohibit—internet gambling, he shot for the stars in 2005 by proposing a model through which state-licensed operators could offer internet gambling to customers worldwide. He also went to existing iGaming operators (i.e., outlaws) for input and support—a very bold move given the government’s distaste for the industry’s pioneers. Perhaps the story’s most interesting angle was that payment processing was the industry’s biggest challenge at the time, and North Dakota just so happened to be home to the nation’s only state-owned bank. Kasper’s plan fell short, but one has to wonder how things would have panned out in North Dakota had he succeeded.

Congressman Barney Frank 6. The Reset

7. Global Ambitions

Congressmen Barney Frank had little to no interest in regulating the internet or the gambling industry but passionately fought all government efforts to tell people what they can or cannot do in the privacy of their homes. For this reason, he adamantly opposed UIGEA and almost immediately after (or perhaps even before) its passage went to work on a bill allowing regulated online gambling. After 12 years of gambling opponents driving for prohibition in Washington, Frank was the first to buck the trend—long before his contemporaries in Delaware, New Jersey and Nevada—by introducing his Internet Gambling Regulation, Consumer Protection and Enforcement Act to a Congress that not long before voted to ban online gambling. Next month, the Top 5 iGaming moves.

The player liquidity issue that plagues U.S.-licensed online gambling operators was no matter for North Dakota state Rep. Jim Kasper. Not only was he one of the first U.S. policymakers to intro-

Mark Balestra is the founder of Bola Verde Media Group and a partner in the iGaming North America conference, held in April in Las Vegas.

8. The Rallying Cry that Wasn’t Seeking support for the fight against online gambling, Senator Jon Kyl often referred to iGaming as the “crack cocaine of gambling,” attributing the phrase to Howard Shaffer, director of Harvard Medical School’s Division on Addiction Studies. The mantra was especially effective coming from such a highly respected scholar. The only problem was that Shaffer never said that about internet gambling; he actually used the phrase in reference to video poker. Kyl liked it, though, so he tailored it to internet gambling and ran with it. His rallying cry was a misquote, but no one—not even Shaffer himself—ever called him on it.

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New Pennsylvania iPoker Bill Introduced

s Pennsylvania lawmakers prepare to begin hearings on bills that would legalize internet gaming in the state, a third iGaming bill has been introduced in the state House of Representatives. The new bill, sponsored by Rep. Tina Davis, is identical to the texts of another of her bills left to die in the Pennsylvania Rep. Tina Davis 2013 legislative session. It would legalize and regulate only poker over the internet. Davis’ bill, which has 11 cosponsors, joins another poker-only measure sponsored by Rep. Nick Miccarelli, and a bill authorizing a complete slate of online casino games sponsored by Rep. John Payne. All three bills are now in front of the House Committee on Gaming Oversight. Payne is the chairman of that committee, and Davis also sits on the panel. Payne’s bill is likely to receive the committee’s first hearings, which were slated to begin with a public hearing on internet and mobile gaming on April 16. A second public hearing on iGaming is slated for May 6.

Texas Congressman Again Wants Federal iPoker Bill

he online gambling debate going on in Congress had an interesting month as a bill to regulate online poker at a federal level was proposed—but not introduced—by Texas Rep. Joe Barton. The Republican congressman has pushed for such legislation before, but this proposal seems in direct opposition to Rep. Jason Chaffetz’s (R–Utah) Restoration of America’s Wire Act, which is working its way through House committees. That bill, called RAWA, would ban online gambling in the U.S. and is backed by billionaire Sheldon Adelson, who is financing a lobbying effort to pass the bill. Barton said his bill would set up a federallevel regulatory framework that would allow for online poker to be U.S. Rep. Joe Barton

Nevada, Delaware Launch Online Poker Player Sharing

evada and Delaware have begun sharing online poker players, implementing an agreement made more than a year ago. 888 Holdings is providing the platform for the Multi-State Player Network. Nevada Governor Brian Sandoval said the two states were “leading by example to provide a legal, tightly regulated online poker market that protects consumers in both our states.” Both Nevada and Delaware have had trouble gaining large player bases due to the small populations in their states. Online gambling is only approved for players within the state’s boundaries. By teaming together, the two states hope to increase player bases. “We now offer an online poker option that is more competitive and more enjoyable for its users, thanks to this collaborative effort,”

Global Gaming Business MAY 2015

Nevada Governor Brian Sandoval and Delaware Governor Jack Markel

Delaware Governor Jack Markel said. Nevada is home to WSOP.com, which is operated by Caesars Interactive Entertainment, and Real Gaming, a website associated with the South Point Casino. Real Gaming is not part of the network because it doesn’t use 888 software, according to the Las Vegas Review Journal. In Delaware, players can access the network through the Dover Downs, Harrington Raceway or Delaware Park websites, which use 888 software.

offered in any state. He will introduce the bill to Congress within the next month. States would have the right to decide whether to join or stay out of the network, Barton said. The bill would also include safeguards and protections for consumers. The bill will only cover online poker and not online slots and casino games. Barton dismissed concerns cited by RAWA supporters that online poker cannot be regulated to protect underage gamblers and ensure gamblers are not located in states that ban online gambling. “It’s being done in some states,” Barton said. “It’s being done overseas. This is not a cross-your-fingers-hope-it-works kind of deal. Once it was up and running, people would say, ‘What was all the hullabaloo about?’” Currently, only Nevada, New Jersey, and Delaware allow legal online poker. RAWA, on the other hand, would ban online poker, online casino games and even online lottery sales.

Optimal Payments Planning Skrill Purchase

ptimal Payments may be moving to strengthen its position as the leading transaction company for online gambling sites through a purchase of Skrill. Reports say the company is preparing a €1.1 billion bid for its competitor. Optimal Payments runs Neteller. According to reports, Optimal Payments would fund the purchase with a €700 million cash offer, financed by a group of banks including Barclays, Montreal Bank and Deutsche Bank. The rest would be funded by the distribution of 37.5 million new shares, 23 percent of which would be distributed to investors Sentinel Group Holdings, who would take a 7.9 percent stake in the new company. Skrill recorded corporate profits of $89 million in 2014. Optimal hopes to have the acquisition completed by the third quarter of this year. “We are taking advantage of an exceptional opportunity to acquire a business we know very well which, combined with Optimal Payments, will be a leading U.K.-based online payments business with the essential scale necessary to be highly successful,” Dennis Jones, Optimal’s chairman, said in a press release.

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The ‘E’Option Electronic table games provide both a viable alternative and viable addition to traditional live tables By Dave Bontempo

aming savors its rich niche. Multi-player electronic table games, a small market segment created several years ago, thrives from its well-defined purpose. Geared to augment live action, entice new players and save operators from staffing low-limit games, they offer substantial versatility. And new weaponry. Units contain more player terminals to maximize space, enhanced side-bet options to increase revenue and max-bet limits to prevent players from triggering payouts that stop games for tax paperwork. Some units accomplish these objectives while being built smaller. Gaming’s electronic arm spans the industry spectrum. In Macau, it serves the world’s richest market with the side-bet advantage of government-imposed caps on the number of live games. Operators want units that accommodate more gamblers. In some American states, ETGs merely help casinos survive until legislation can expand their product line. Manufacturers portray electronic games as multiple bang for the buck. Casinos can utilize them and shift dealers toward the better tips of a high-limit game. Second, they speed up payouts and increase the number of hands, spins or rolls. Gone is the agonizing wait between craps rolls, for instance, based on mountain-high chip stacks and a crowded, fever-pitched game. Three, human error disappears. Most electronic table games concern brick-and-mortar sites, while online games represent future business. The electronic games presentation can entail a hologram, videos or a live dealer mixed with an electronic terminal.

Wielding an Arsenal New York-based Scientific Games quickly became an industry powerhouse by spending about $6.5 billion to annex WMS Industries and Bally Technologies in 2013 and 2014, respectively. The newly merged company offers powerful interactive systems, platforms and gaming product brands. They include the Bally, WMS, Shuffle Master, Scientific Games Lottery, Williams Interactive, MDI and SG Gaming brands. The combination provides customers multi-channel distribution to land-based, social, mobile and casual online platforms under the Scientific Games brand. “We have already seen in a number of our agreements the ability to leverage the content and provide total packages to the gaming floor,” says Gabe Baron, general manager and senior director of electronic table games for Scientific Games. “It has given us a chance to hit this market even more quickly and with more strength. We expect electronic table games to be a double-digit growth 48

Global Gaming Business MAY 2015

Table Master Fusion blackjack

area for many years to come.” Tom O’Brien, the company’s senior vice president of electronic table games, says the American market is largely untapped for this product segment. The games occupy a small slice of gaming space. One American location that does stand out is Resorts World Casino in New York, which contains more than 1,000 electronic tables and an appeal to the Asian market, he indicates. A healthy menu of baccarat, craps, roulette and sic bo is sprinkled throughout the property. New York City has a world of gaming options at Resorts World Casino with its innovative electronic tablet starting at $10. Scattered among the 5,000-plus games are baccarat, roulette, craps and sic bo. The European Roulette zone behind Bar 360 offers dozens of single-zero roulette games, while Table Games Square offers baccarat starting at just $10. “The area is not far from Chinatown,” O’Brien says, “and there are a significant number of Asian players who come in, brown-bag their lunch, pack their cigarettes and don’t get up from the table for several hours.” Scientific Games features several electronic products in the Fusion line. Fusion Hybrid offers baccarat, roulette and sic bo dealer podiums equipped with live game results. It is suitable for stadium-style and smaller environment configurations. Fusion Hybrid allows modular, configurable floor layout options and comes with a variety of terminal lighting color options. Betting timers are configurable for each game, and concurrent wagering allows action on up to four games at once. Four tabs allow quick switching between games. Table Master Fusion blackjack combines the sleek look of a multi-player electronic game with recent enhancements in versatility. Players can wager on popular side bets like Royal Match 21, Bet the Set 21 and Royal Match 21 Progressive. “We offer the industry’s most well-known desired menu of side bets,” Baron asserts. “This is an important selling point for us.” The five-seat table design enables operators to offer some of the most popular table games 24 hours a day. And the timing can be automatic. “The built-in scheduler does not have to be modified by the casino,” Baron

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Fusion Hybrid arranged in a stadium-style configuration

says. “It can be a $3 blackjack limit during the week and a higher denomination on the weekend, if an operator prefers. Players are given warnings about the change in limits.” The game contains a video dealer, who has prerecorded range of instructions concerning bets and congratulations of winners.

Going Live London-based TCSJohnHuxley is constantly making improvements to its electronic table game platforms, most prominent of which is Gaming Floor Live (GFL), a network platform and table-game management system that allows operators to track data from a full complement of e-tables. The latest addition to the system is the GFL Gaming module, a setup that allows live table games to be played on both fixed and portable electronic terminals. “Now, every available licensed square foot—from an awkward, previously unused alcove to a smoking zone—can be transformed into revenue-generating space,” says Nick French, director of development for TCSJohnHuxley. “GFL Portable Terminals offer players the privacy and convenience of terminal betting, among the excitement of a live casino. With a portable tablet, customers can take their live table game with them, such as to the bar, restaurant or to a smoking zone, without interrupting play. This also means that casinos can increase the number of player positions per table without investing in additional costly equipment.” GFL fixed terminals are a tethered solution for expanding the gaming floor without infringing gaming regulations. With a compact fixed unit, casinos are still able to benefit from the perks of space-saving electronic gaming while ensuring no gaming regulations are contravened as terminals are sited in licensed areas. Both GFL portable and fixed terminals are uniquely flexible, enabling operators to offer any game that’s connected to the GFL platform. At the simple click of a button, customers can play multiple tables at once. Real-time monitoring across GFL Gaming ensures maximum security. Upon paying for credit at the cash desk, players of fixed terminals are provided with a unique numerical login used to access terminals. This login is associated Gaming Floor Live

Hoosier Park blackjack e-table

with their credit balance from the server. For portable terminals, players are provided with a credit-loaded tablet. With both options, as play begins, all bets and cash transactions are approved by the server before being accepted, and can be overseen by operators on an administration console. For GFL portable terminals, customers can also use a fast-service “Crediting Kiosk” for credit top-ups during game play. For added security, casinos can also choose to connect their terminals to a wireless security grid, which monitors their position within the venue. Should a portable tablet exit the designated areas outlined by the casino, it will automatically be disabled. “GFL Gaming is an extremely adaptable solution,” says French. “With regulations in mind, we’ve designed two unique solutions to maximize licensed floor space. No matter what a casino’s local guidelines, GFL Gaming will increase live table revenue while expanding the casino floor and using space efficiently—providing a significantly smaller footprint than traditional electronic gaming terminals.”

A New MiniStar Slovenia-based Interblock is recognized for high-quality, multi-player machines. Fully and semi-automated electronic gaming tables as well as video gaming solutions are available to casinos, arcades and gambling halls. Interblock’s MiniStar Roulette brings the classic game to casinos in a unique electronic gaming table format. It consists of a fully automated doublezero roulette generator and is available in a five-, eight- or 10-seat configuration. Interblock recently introduced its new automated roulette in the Netherlands. The automated gaming device includes the essential elements of a traditional table version of the game, including a real roulette wheel. The G5 MiniStar Roulette product incorporates the high-end features of Interblock’s Diamond Roulette line—such as adjustable illuminated color arm rests, faster result detection, additional side bets, an 18.5-inch screen and an MAY 2015 www.ggbmagazine.com

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Hoosier Park roulette e-table

ergonomically designed surface—in a smaller diameter (approximately 2 meters or 6.5 feet). Pay systems include all well-known bill acceptors and ticket printers. Interblock Chairman Joe Pececnik considers MiniStar Roulette an electronic table games market-changer. Small plays tall. “It’s not only the smallest roulette on the market, but also features a new and improved wheel that is the fastest in the world,” he says. “It can generate up to 30 percent more games per hour than regular automated roulette wheels, which is a great advantage to the house and player, because if you spin more, you win more. “The MiniStar Roulette configuration is highly flexible, which is critical to medium and smaller properties that are challenged by space constraints. It can also be adjusted to fit into the design standards of any casino with 256 color settings. We also designed player information displays (PIDs) built upon our latest technology and software that create an interactive relationship between the game and the PID, improving overall fun and usability.”

Electronic Games Bridge Indiana-based Centaur Gaming owns prominent racing and casino facilities Hoosier Park and Indiana Grand, which combine to host about 7 million visitors each year. Electronic table games fit a different description for this company. They substitute for live table games in areas that have not been approved for them. Hoosier Park and Indiana Grand are the only two state properties not yet authorized for live table games, according to Jim Brown, president and COO of Centaur Gaming. ETGs augment the slots, restaurants and live racing for Centaur’s two properties. Hoosier and Indiana Grand have a combined 48 electronic table games, and Indiana Grand also features a 10-table electronic poker room, he indicates. Centaur has offered its electronic line via companies like Interblock and Scientific Games (under the Shuffle Master banner). Customers can get a sampling of baccarat, craps, roulette and blackjack, like an eight-deck shoe, $10 minimum and $450 maximum bet with the dealer hitting on soft 17. The roulette table features dual roulette wheels for continuous gaming action. ETGs expand product offering while the company seeks legislative help to offer live games. “The challenges we faced without live table games made us understand that if we don’t lay this property out right, we would become just another slot warehouse,” Brown says. “We were the first place in the country to come up with imitated pit stands to make you feel like you were at 50

Global Gaming Business MAY 2015

a casino with a live table. We started with blackjack, 3 Card Poker and roulette, and then added some craps and card games.” Centaur, which was instrumental in getting electronic gaming approved in 2007, may garner legislation to open the live-game market this year. Brown believes Hoosier and Indiana Grand may be able to offer 12 live games apiece before the year ends. The pilot program could enable more games later, as Indiana battles competition in Ohio, Illinois and perhaps Kentucky. The electronic table games account for a modest 5 percent of casino revenue, Brown says, with the 2,000 slots playing the dominant role at Hoosier and Indiana Grand. Yet, ETG contributions would presumably increase with an enhanced live table-game menu, as patrons waiting to get on them could play electronically. Another rising tide lifting all product boats concerns horse-racing plans. Hoosier Park was selected to host the prestigious Breeders Crown, the harness-racing equivalent of the Breeders Cup, in 2017. The track was awarded all 12 year-end championship races, worth a combined $5 million, by the Hambletonian Society, which oversees the Breeders Crown series. Hoosier Park’s harness-racing pedigree brings foot traffic into the property.

Tip of the ETG Iceberg Aruze Gaming produces innovative products, including high-resolution video and stepper slot machines, communal gaming products and multi-terminal devices. In the midst of its innovation is an ETG concentration. “The best is yet to come for electronic table games,” says Paul Omohundro, electronic table games business manager for Aruze Gaming America in Las Vegas. “At some point in the not-so-distant future, operators will have to make the difficult decision to no longer operate $5 table games in their pits. They can’t afford to operate them now, but the demand and the tradition are too overwhelming to force a change. “It will take a few strong table game leaders to start the trend, much like the TITO transition, and you will see electronic table games replacing the $5 live games. And once this occurs, it will change the ETG outlook forever. The performance will increase due to the ability to operate them as a $5 game, whereas now, in most locations, ETGs have lower minimums, down to $1, and are compared to the rest of the slot floor. These typical, high-RTP (return to player) games suffer in performance when the minimums and maximums are programmed more like a slot machine and less like a table game.” Omohundro says Aruze gained a significant market breakthrough in the Southern California market with Shoot to Win Craps, which debuted at Spotlight 29 in late March. He expects the company to blanket Southern California with it. Aruze also obtained recent approvals in West Virginia and North Carolina for the game. Shoot to Win Craps features an electronic chip rack that players can use to place bets on their monitors, a craps-table replica, via touch-screen technology. The designated shooter hits the button to toss the dice. Players can also pass the dice to hot shooters and make highreturn side bets like high-low. “We continue to develop features that engage the players,” Omohundro says. “The ability to ‘shoot’ the dice in Shoot to Win Craps or to pull the handle in Lucky Big Wheel or ‘squeeze’ the cards in Dealer’s Angels Baccarat, for example, gives the players the perception of participating in the game. We also replicate the look and feel and sounds of the traditional games versus the competition versions of dealers, colors, ergonomics and other gimmicks that take away from the traditional experience. I see high growth in this area for us in 2015.” Wherever the bells, whistles and frills originate, ETGs remain a valued industry wild card. As minimum bets and costs to operate live table games continue to climb, the advancing technology of ETGs make them, more than ever, a viable alternative in the pit.

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Tribal Gaming’s Plus Side Washburn: Casinos making a dent in poverty, tragedy on Indian lands

Assistant Secretary for Indian Affairs Kevin Washburn

By Dave Palermo

ribal government gambling continues to make a significant positive impact on the social and economic progress of American Indians, though it has “hijacked” the debate on newly acquired lands for casinos, Assistant Secretary for Indian Affairs Kevin Washburn says. Resources from the $28 billion Indian gaming industry have helped the 240-plus tribes with casinos fund health care, education, law enforcement and other government programs, Washburn told attendees at the April conference of the National Indian Gaming Association in San Diego. “We’ve come a long way in 30 years,” Washburn said in a keynote address to attendees at last month’s Indian Gaming tradeshow, a time span that began with reservation gambling and passage in 1988 of the Indian Gaming Regulatory Act (IGRA). “I don’t think 30 years ago anybody would have dreamed we’d be where we are today.”

Gaming Distractions In a pre-speech interview with GGB magazine, Washburn said tribes have benefited greatly from casino revenues, which generate about 10 times the budget for the Bureau of Indian Affairs (BIA). “Everything (Interior) works for is better resourced at the tribal level because of Indian gaming,” he said. But he reiterated a concern expressed when he was appointed by President Barack Obama in 2010 that gambling has to a degree “hijacked” federal policy on Indian gaming, particularly in placing land in trust for tribes. Anti-gambling sentiment has blocked efforts to get a congressional fix to the 2009 U.S. Supreme Court in Carcieri v. Salazar, which hinders Interior efforts to place land in trust for tribes not deemed to be “under federal jurisdiction” with passage in 1934 of the Indian Reorganization Act. A number of Democratic senators and others in Congress oppose a legislative fix that does not include amending IGRA provisions on newly acquired lands for casinos. Anti-gambling groups, along with political leaders and some tribes, have also pushed back against Interior attempts to amend regulations dealing with the official acknowledgement of Indian groups as federally recognized tribes. “Gaming is a distraction for some members of Congress and others,” Washburn said. Washburn said he will continue to push for changes in Interior’s tribal recognition regulations despite a letter from some members of the House Resources Committee asking him to extend the period for public input into the process. “We’ve not given up the effort,” Washburn said. “We’re still working diligently on trying to improve the process. “That’s a process that doesn’t have very much to do with gaming,” he said, noting that of 51 applications to the Office of Federal Acknowledgement 52

Global Gaming Business MAY 2015

(OFA) since it was established in 1978, 34 were rejected. Indigenous groups have long regarded the OFA process as being unfair, with millions of dollars in legal fees and research and decades of bureaucratic delays often leading to unjust determinations. But there are tribes—notably the Cherokee Nation in North Carolina and Oklahoma and some California tribes—who caution that lowering standards for federal recognition could diminish tribal legitimacy and reduce congressional funding for indigenous programs.

Fixing a Hole Washburn also expressed some optimism about getting a legislative fix to the Carcieri ruling. “Congress has changed, and there will be new people looking at a fix, and we’re anxious for that,” Washburn said. “Any time you get those dynamics, things change. I am hopeful that with a fresh set of eyes we will get a fix. I would say hopeful rather than certain.” Most of the concern expressed by congressional leaders is that state and local governments lack input in Interior’s land-trust process for casinos. “When we explain the process… they are always surprised at how much input state and local governments have,” Washburn said, including participation in National Environmental Policy Act (NEPA) reviews. “That leads me to think they’ve been misled somewhere along the way. There’s misinformation out there about land into trust. There are always political concerns in any proposed Indian development, especially when it involves Indian gaming.” Despite the hardships created by Carcieri and other casino-related litigation— such as Salazar v. Patchak and Big Lagoon Rancheria v. California—Interior under the Obama administration has processed more than 1,800 land-trust applications for nearly 300,000 acres, ending a virtual moratorium on decisions under the Bush administration. Only 18 of the applications were for casinos, Washburn said. Former high-ranking Interior official George Skibine said the agency under Bush administration Interior appointees Gale Norton and Dirk Kempthorne was hesitant to place land in trust for tribes, largely because of the longstanding Cobell litigation alleging mismanagement of the trust fund. Skibine said there was also push-back in the agency for placing newly acquired land in trust for casinos. “Both secretaries (Norton and Kempthorne) were not really enamored with Indian gaming,” Skibine said. Placing land in trust for tribal governments heads a myriad of accomplishments by Interior under the Obama administration that generated a standing ovation from tribes at the conclusion of Washburn’s keynote address. Many Interior reforms began with Secretary Ken Salazar and Washburn’s

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predecessor, Pawnee Larry Echo Hawk, who resigned in 2012 to become general authority of the Church of Jesus Christ of Latter-day Saints. Salazar has since been replaced by Interior Secretary Sally Jewell. Washburn, an Oklahoma Chickasaw, said settling Cobell litigation was crucial in Interior successes on a litany of Indian issues. â&#x20AC;&#x153;Getting that (Cobell litigation) settled was hugely important for Indian Country,â&#x20AC;? Washburn said. â&#x20AC;&#x153;You canâ&#x20AC;&#x2122;t serve people at the same time youâ&#x20AC;&#x2122;re litigating against them.â&#x20AC;?

Administration Efforts

â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s what you want from a regulatory agency. You donâ&#x20AC;&#x2122;t want a â&#x20AC;&#x2DC;gotchaâ&#x20AC;&#x2122; type system, but when necessary the NIGC has taken action to close a casino. â&#x20AC;&#x153;Thereâ&#x20AC;&#x2122;s not a parade of horrible tales about things going onâ&#x20AC;? with tribal gambling, Washburn said. â&#x20AC;&#x153;People cannot point to a bunch of serious problems that the NIGC hasnâ&#x20AC;&#x2122;t addressed.â&#x20AC;? As the Obama administration comes to a close, Washburn hopes Obama policies can move forward. â&#x20AC;&#x153;We have a lot of priorities,â&#x20AC;? he said. â&#x20AC;&#x153;One of them is institutionalizing all the things weâ&#x20AC;&#x2122;re doing to make sure they are carried forward into the next administration.â&#x20AC;? The leveling-off of tribal casino revenues, which began before the 2008 recession, is of some concern to the assistant secretary. But heâ&#x20AC;&#x2122;s confident the industry remains strong, despite indications of market saturation. â&#x20AC;&#x153;Growth is always better,â&#x20AC;? Washburn said. â&#x20AC;&#x153;But it (gaming revenues) plateaued at a very high level and itâ&#x20AC;&#x2122;s providing a lot of resources in Indian Country. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;m sure every one of those tribes would like more revenue and more resources so we can do more for our citizens.â&#x20AC;? Interior and the BIA operate in a â&#x20AC;&#x153;perpetual crisis mode,â&#x20AC;? Washburn said, which during the week of the NIGA convention included an ongoing teenage suicide epidemic in Lakotaâ&#x20AC;&#x2122;s Pine Ridge Indian community and a wildfire on the Rosebud Sioux reservation. â&#x20AC;&#x153;Thereâ&#x20AC;&#x2122;s always going to be a need for more resources. Poverty is just a fact of life in Indian Country,â&#x20AC;? Washburn said. â&#x20AC;&#x153;What I see, day to day, is that tragedy rides side by side with poverty. Thereâ&#x20AC;&#x2122;s a lot of tragedy in Indian Country, and a lot of it is due to poverty. â&#x20AC;&#x153;Indian gaming has made a dent in that poverty and tragedy. Our budget and our work have made a dent in it,â&#x20AC;? Washburn said. â&#x20AC;&#x153;But we have not come anywhere near solving it.â&#x20AC;?

Barack Obamaâ&#x20AC;&#x2122;s White House has increased the BIA budget, settled a number of water rights and land cases, enacted the Tribal Law and Order Act, permanently authorized the Indian Health Care Improvement Act, established land-trust procedures for Alaska Natives and reformed reservation business leasing policies. Obama also appointed a number of Native Americans to key positions in the administration. They include Navajo Hilary Tompkins as Interior solicitor. Tompkins worked with Washburn and Deputy Assistant Secretary Larry Roberts, a Wisconsin Oneida, in developing an administrative system to work within the legal constraints of the Carcieri decision. Navajo Charles Galbraith was named associate director of the White House Office of Intergovernmental Affairs and Cherokee Kimberly Teehee was made senior adviser on domestic policy. Teehee was succeeded by Jodi Gillette, a citizen of the Standing Rock Sioux Tribe. Those and other appointments mean Indian issues are no longer the sole province of the BIA. Obama mandated that federal agencies establish formal consultations with tribal governments and initiated the annual White House Council on Native American Affairs. â&#x20AC;&#x153;We really want that to keep going forward,â&#x20AC;? Washburn said of the annual event. â&#x20AC;&#x153;That has really improved communications with the federal government.â&#x20AC;? Washburn is currently drafting regulations to ensure adherence to the Indian Child Welfare Act. â&#x20AC;&#x153;There have been guidelines, but the guidelines arenâ&#x20AC;&#x2122;t enough,â&#x20AC;? he said. â&#x20AC;&#x153;Regulations are enforceable. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re still losing far too many children !4-S s #ASH !DVANCE s 4ICKET 2EDEMPTION ! 44-S s s #ASH !DVANCE s 4 ICKET 2 2EDEMPTION from Indian reservations and Indian communi&&!")TRACK 4ITLE s )NTEGRATED #HECK #ASHING !")TRA ACK 4ITLE s )NTEGRATED # #HECK #ASHING ties,â&#x20AC;? he said of federal adoption policies. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s important for them. Itâ&#x20AC;&#x2122;s important for #USTOMER 3ERVICE AND MUCH MORE # #USTOMER 3ERVICE AND MUC CH MORE you. Thatâ&#x20AC;&#x2122;s our future,â&#x20AC;? Washburn said to loud applause. Partnering P artnering w with ith the the m most ost ttrusted rusted n names ames iin n ga gaming aming â&#x20AC;&#x201C;

Regulatory Review Washburn in his pre-keynote interview expressed support and confidence in the National Indian Gaming Commission, the federal regulator for tribal casinos. He rejected criticism from Congress and others that the NIGC is not adequately policing and providing leadership to the industry. â&#x20AC;&#x153;I think the NIGC has done a great job helping establish a really good relationship with tribes,â&#x20AC;? Washburn said of agency officials. â&#x20AC;&#x153;Theyâ&#x20AC;&#x2122;ve been giving tribes technical assistance so they can achieve compliance, and thatâ&#x20AC;&#x2122;s been going well.

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CUTTING EDGE by Frank Legato

Analyzing Roulette Product: Gaming Floor Live Wheel Analysis Manufacturer: TCSJohnHuxley

aming Floor Live (GFL) Wheel Analysis is a new real-time roulette optimization tool designed to maximize key performance areas and profitability. With GFL Wheel Analysis, operators are able to maintain their TCSJohnHuxley wheels, as well as other manufacturers’ wheels, at peak efficiency, allowing complete visibility of a wheel’s performance and the ability to highlight and detect any bias. GFL Wheel Analysis allows operators to assign wheels to certain tables and collect data in the background to generate concise and detailed reports that constantly check a wheel’s integrity. A configurable webinterfaced dashboard allows access to different analytics and reports based on user authority and runs as a distributed service—allowing easy access from any device on the casino’s network. This gives casino staff a snapshot of their operations, as well as the ability to drill down to detailed analysis. These reports provide easy-to-read diagrams that illustrate acceptable and unacceptable levels of performance and bias. Reports can be filtered by date, table, game speed and various other selections, depending on the type of report being shown. The system also provides exceptional alarms, such as device offline, wheel spun too fast or slow or drop zone anomaly,

giving operators the tools to make good decisions and take appropriate and immediate actions. GFL Roulette Wheel Analysis can also record all maintenance activity on wheels. Regular service and maintenance of any RNG device is essential to ensure it is performing at optimum levels. All activity is recorded and can be checked to ensure wheels are being maintained and cleaned according to approved standards and guidelines. With GFL Wheel Analysis, operators can have peace of mind as they can track wheel performance in real time, enabling them to manage risk and optimize game performance. For further information, contact Tracy Cohen, director of marketing, at tracy.cohen@tcsjohnhuxley.com.

Reporting Made Simple Product: LOGiT Incident Reporting Manufacturer: Biometrica Systems Inc.

OGiT, designed and distributed by Biometrica Systems Inc., is an incident reporting and case management system designed specifically for casino surveillance and security departments. It allows users to rapidly create detailed reports using an intuitive interface that is simple to understand and easy to operate. Although this program allows stand-alone incident reports to be created quickly and efficiently, LOGiT also allows daily log entries to be converted to incident reports with the click of a button. Cases may be created allowing any and all materials related to an event to be combined in a single file. Multiple logs, incident reports, pictures and video can be combined to recreate the entire chain of events related to an individual or incident, easily distributed electronically or through downloading to a transportable device. All additions, corrections and deletions to cases and incidents are tracked, allowing a property or enforcement agency to audit every change to the documentation. Each of LOGiT’s document reference numbers is automatically gen-

Global Gaming Business MAY 2015

erated by the system, ensuring there can be no duplication of reference numbers. Any report or log created by LOGiT can be easily accessed utilizing multiple search criteria including date and time, incident number or by searching key word(s). LOGiT streamlines the creation and management of daily logs, incident reports, procedure violation reports, custom forms, shift summary reports, statistics, recovery reports and a variety of other management reporting tools. The LOGiT reporting system integrates seamlessly with all Biometrica software modules, giving users a unique software combination of critical games protection and incident reporting in one easy-to-use application. Custom forms allow users to simply and quickly create templates for forms and checklists for individual departments’ requirements. Newly designed templates then become readily accessible for use. Once a template is utilized, the file is stored and searchable. LOGiT also incorporates a powerful real-time dispatching module, which manages security staffing activities, events and locations. The dispatcher also allows access to all the powerful search features and information contained in VisualCasino 6. For more information, visit biometrica.com.

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

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REGULATION

Bad for All Opposing the proposed change to taxable jackpots

By Brian D. Decorah

n response to the recent posting of IRS Notice 2015-21, we are preparing our opposition to the proposed rules, and request that our fellow operators join us in vocalizing our concerns. If you haven’t already submitted your comments to the IRS, there is still time.

CHANGING THE TAXABLE JACKPOT THRESHOLD FROM $1,200 TO $600 Our procedures, gaming machines, accounting systems, staffing levels and business models are based on the $1,200 threshold, resulting in tens of thousands of jackpots per year at FireKeepers. Any change to that threshold, up or down, would impact our operation. Here is a quick list of reasons that outline how the proposed rule would negatively impact our gaming operation: • Increased Staffing: A quick review of our pay tables indicates that the frequency of taxable jackpots on high-denom machines would likely increase by 300 percent, up to 3,500. We manually and physically transact with each jackpot winner in excess of $1,200, to ensure that we properly identify the guest and accurately report the potential tax liability. Therefore, the proposed change would significantly increase the staffing requirement to attend to the additional jackpots, which we have estimated at $870,000 per year (including burden). • Less Revenue: The slot machines lock up when a taxable jackpot is hit, until we complete the necessary paperwork to unlock the machine. Lowering the threshold would increase the number of taxable jackpots, which would result in more players waiting for the W2G paperwork to be completed, resulting in less time gaming, which lowers gaming revenues and compact/tax payments.

• Vendor Changes: As vendors change their gaming software and/or pay tables to decrease the frequency of jackpots in the $600$1,200 range (at the request of the industry, or to meet expected demand), the vendor costs will increase, which will result in increased costs to the casinos.

SINGLE W2G REPORTING At first glance, the proposed change appears to reduce the amount of administrative work related to taxable jackpot reporting. But without industry feedback on implementation, the proposed changes are very concerning, for the following reasons: • Gaming Day: Our gaming operation, like most, uses an early-morning gaming day for record-keeping purposes. The purpose of using an early morning start/end of the gaming day is to take advantage of lower business volumes,

‘‘

A Wall Street gaming analyst recently estimated that each casino may lose $530,000 per year. Your costs may even be higher, based on your current systems and operational priorities.

Global Gaming Business MAY 2015

”

with the goal of increased accuracy and efficiency. Using a 12 a.m.-11:59 p.m. calendar day would require an investment in manual reporting, or upgraded system reporting capabilities, or both. Either includes the burden of additional cost. • Player Tracking Systems: Simply put, they were created to develop loyalty programs for frequent players, based on an estimate of each club member’s overall play. The programs were not built with the responsibility of attesting to individual tax liability. Enhancing our systems to meet the responsibility of being an official tax document will increase costs. • Guest Notification: Operators rarely know when a gaming session ends for any given

player. This rule would require us to notify all taxable jackpot winners that their reportable winnings would rely upon what the player tracking system reports at the end of the day, pursuant to the taxable threshold. Trying to notify and/or explain the new tax rules would undoubtedly cause misunderstanding and alarm among our guests, resulting in frequent disputes over the accuracy of the activity being tracked. • Player Behavior: We further speculate that the proposed rule would have an unknown impact on gaming behavior. Will the players use their cards more often, or less often? Will they be tempted to play using other players’ cards, or will they ask other players to play on their cards in an attempt to reduce or avoid tax liability after hitting a jackpot? The answers are unknown, and a significant concern. In every case, the proposed rules are bad for the players, bad for the vendors, and bad for the casinos, if we are not consulted on the potential impact of each rule. The additional burden to the operation, in addition to the dissatisfaction of the guest, when combined with the increased vendor costs to adjust to either of the proposed rules would, with certainty, have a negative impact on gaming revenues. A Wall Street gaming analyst recently estimated that each casino may lose $530,000 per year. Your costs may even be higher, based on your current systems and operational priorities. We have until June 1 to submit comments to the IRS. But, I recommend that you consider sending comments to your respective gaming associations by May 1, and ask them to represent your voice and concerns, as well. The AGA has done a fine job of sending regular updates to members and email subscribers, but we need to be more vocal in our opposition to the proposed changes. We hope that you join us in our efforts to be heard.

Brian D. Decorah is senior vice president of FireKeepers Casino Hotel in Battle Creek, Michigan.

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FRANKLY SPEAKING by Frank Legato

Paging Senator Einstein…

Global Gaming Business MAY 2015

The economy has somewhat recovered, but the tax remains at the higher rate. In the meantime, Maryland opened up shop, hitting Delaware casinos for 40 percent or more of their business, by some estimates. The casinos are pleading to go back to paying the same portion of their money to the state as they did originally. Lawmakers are having none of it. In fact, get a load of the latest proposed solution to Delaware’s sagging gaming revenues: Build more casinos. Yes, you read that right. A prominent Delaware attorney—I’ll leave his name out, because I’m going to call him a nit-wit, and I don’t want to get sued—has testified at every one of the panel’s hearings, lambasting the casinos for seeking a state “bailout.” Now, it turns out he’s working with like-minded geniuses in the state legislature on a bill to create three more casino licenses for the state, to be bid out at $10 million per license. “They have sucked the money out of those properties for so long, and they overleveraged them, and now they have the unmitigated gall to come and ask for a bailout,” the unnamed nit-wit told Delaware State News. “Why doesn’t every other business in the state do that? They want a monopoly and a tax break.” Umm… Every other business in the state doesn’t have to give up two-thirds of their profits to government. And you know, I figured that out with absolutely no government experience. The amazing part is that someone is actually going to bid on those licenses. I wonder who. “Hey, Moe, let’s open a casino in Delaware!” VICT OR R INALD O

his may come as a shock to you, but some of the politicians running our state and federal governments are not exactly the sharpest tools in the shed. However, when it comes to commercial casinos, the numbskullery is often earth-shattering. Some of the newest revelations coming from states with casinos take things beyond cluelessness and into the realm of what Moe used to call “chowderheads.” And as always, it goes back to the fact that the casino business is not treated by government like any other business. They act like running a casino is a crime they’re letting us commit, as long as we give them lots of money. Often, most of our money. Ever since states beyond Nevada and New Jersey began legalizing casinos 20-odd years ago, state lawmakers have viewed this business as a giant ATM for state budgets. Maryland comes to mind immediately. The five casinos in Maryland pay 67 percent of the money they make from slot machines to the state. Sixty-seven percent. Somehow, industry lobbyists managed to get the state’s lawmakers to approve a 20 percent tax for table games, advising them that table games have to be operated by humans, and humans have to eat. When Maryland Live! and Horseshoe Baltimore asked to remove a couple hundred slot machines from areas in which employees were hearing echoes as they spoke, and perhaps putting in table games that would, you know, actually make money, the gaming commission granted the permission. Then, the numbskullery began. Twenty state senators signed to co-sponsor a bill to raise the table game tax because they saw the casinos’ move as some sort of ploy to grab more money rightfully belonging to the state by avoiding the high slot tax. Now, I’m no Einstein, but it seems obvious that no one was playing those slot machines, and as a result, the state was getting 67 percent of nothing. At a higher tax rate, tables will lose money. So, instead of getting 67 percent of nothing from one area of the floor, they’ll get 30 percent of nothing from their entire table-game business. “Hey, Moe! I just traded 67 percent of nothing for 30 percent of more nothing.” “Wow—you’re a very intelligent imbecile!” But the cluelessness of Maryland politicians was, remarkably, exceeded last month in Delaware. As you may know, a blue-ribbon panel made up of state lawmakers and government officials has twice recommended that the legislature lower the stifling tax on the state’s three racinos, which have struggled mightily since losing half their business to Maryland. The casinos are tanking, and the state is losing revenue because of it. Lawmakers, in their infinite wisdom, raised the revenue tax in 2009 to more than 60 percent once all fees are included. It was because they were making less money, because of the recession. State lawmakers decided to take a bigger slice of a smaller pie. Essentially, the casinos were mugged.

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EMERGING LEADERS Career Holiday Alex Koch Corporate Director of Development & Administration, Eureka Casinos s children, we have this idea of what we want to be when we grow up. Most of us do not get to turn that dream into a reality. However, Alex Koch, the corporate director of development and administration at Eureka Casinos, followed his aspiration from youth. During one summer of his childhood, Koch visited his grandparents in Las Vegas. “I was enamored by the Mirage, the first casino we went to—I had never seen anything like it,” he recalls. “The design, the restaurants, all the casino games, the volcano, the white tigers and dolphin habitat wowed me! I decided then that I wanted to work in Las Vegas creating great guest experiences using my math and leadership skills.” Koch learned the business of hospitality and the meaning of service at Cornell University’s School of Hotel Administration. “I was exposed to the world’s greatest hospitality education and got to learn from titans of the industry,” he says. He learned financial modeling, yield management, and the importance of a systems-based approach to service. In college, he interned with MGM Mirage and assisted in the purchase and sale of the Golden Nugget properties. “At Golden Nugget, I learned how to apply academic theory to the real world,” Koch says. Working for Andre Carrier, chief operating officer for gaming at the Golden Nugget, he helped drive incremental revenues and profitability by focusing on the customer experience and using analysis and data-driven decision-making. In 2008, he joined Las Vegas Sands and ran financial planning and analysis for their U.S. operations. “In the middle of the global financial crisis, my team helped reduce operating expenses by $100 million and stabilize profitability in the Venetian and Palazzo,” Koch says. He re-joined Andre Carrier in 2009—however, this time at Eureka Casinos. Eureka Casinos operates two casinos, one in Las Vegas and the other in Mesquite, Nevada, as well as myriad other businesses under the Urban Group brand. “I’ve spent the last five years of my career at Eureka, helping innovate, and making data-driven decisions that exceed customer expectation and drive profitability at the same time,” Koch says. He finds that the most enjoyable aspect of his profession is creating special moments and experiences for guests. He also enjoys helping solve problems for guests, his fellow employees, and the business. “Whether the issue is $100 or $100,000, I try to always be fair, gain understanding of each side, and guide people to an amicable solution,” says Koch. The mentors in Koch’s life have helped him in his personal and professional development. “My parents,” he says, “who gave me ethics and the right frame to view the world; Carrier taught me about how to lead and be a strategist; Andrew Klebanow, principal of Global Market Advisors, taught me how to view the world from a marketer’s perspective; Tilman Fertitta, owner of Landry’s Restaurants & Golden Nugget, taught me how to think like an owner; Josh Hirsberg, CFO of Boyd Gaming, taught me to always proofread and check your work meticulously; and Greg and Ernie Lee, the owners of Eureka Casinos, live lives to be modeled.” Koch mentors young people just starting out in their careers, volunteers as the treasurer of Los Vaqueros Las Vegas, as president of the Cornell Hotel Society’s Las Vegas Chapter, and with Three Square Food Bank. Remember, he says, life is service. —Alexis Garber, The Innovation Group

Global Gaming Business MAY 2015

Born To Gaming Valerie Turner Casino Manager, Caesars Entertainment Corporation alerie Turner puts herself out there and takes the opportunities that come her way. Born and raised in Las Vegas, she started as a guest room attendant in housekeeping at Harrah’s Las Vegas when she was 18 years old. “In my first 10 years in the hospitality industry, I was a housekeeper, a status board operator, a housekeeping supervisor, an environmental services assistant manager, a retail manager, a spa manager, an assistant casino manager, and now the casino manager for six Caesars Entertainment Las Vegas properties,” Turner says. “As you can see, I will try anything at least once.” As a casino manager for the Flamingo, Margaritaville casino and the Cromwell, Turner makes sure the daily casino operations run smoothly. Her role includes responsibilities such as determining the optimum staffing levels in order to give the best guest service and fostering the morale of the staff that are directly responsible for the guest experience. “I work to drive revenue for the properties as well as network with other departments to ensure the customer only has the best experience,” says Turner. “Gaming is in my blood,” states Turner. “Growing up in Vegas, I can remember being fascinated by the slot machines that used to be in restaurants and convenience stores all over when I was a kid. This was just a prelude to my passion for the gaming industry.” Turner most enjoys the constant contact with people from all walks of life. “I love that no two days are alike in the casino and that I have a different story to tell every night of the year,” Turner says. “There is a school of thought in hospitality, that every casino property has the same amenities and each company must have something that sets them apart from the guy across the street. With the saturation of the gaming industry, especially in Las Vegas, your company needs something that sets you apart from your competitors. “We hire the best and brightest with personalities that are larger than life to give our guests what they can’t get across the street.” The importance of mentoring is one of the key aspects to achieving success. For Turner, there are three people she considers her mentors. David Hoenemeyer, regional president of Bally’s, Paris and Planet Hollywood, has taught her that your dreams are non-negotiable. Steve Ellis, regional president of slotswest and mid-south regions, taught her to appreciate everyone she works with and the people who work for you as well as to conduct your business like you own it. Paul Breci, vice president of slots for Planet Hollywood, Bally’s, Paris, the Cromwell and Flamingo, has taught Turner to never stop learning. The best advice Turner can offer comes from her mother, who came to Las Vegas from Jamaica over 40 years ago: “Always perform your duties like the boss is watching, even when no one is around. Become an expert in your field and then step up your game. If you are a housekeeper, be the best housekeeper in the business, and then become the housekeeping manager and excel at that. If you bus tables, bus those tables like you paid for them and then work on becoming the restaurant manager. “When it comes to your employees, never be the smartest person in the room. Strong steel is forged by something stronger than itself, and great leaders are developed by smarter people than themselves.” — Erika Meeske, The Innovation Group

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Online Outline Shahar Attias Founder and CEO, Hybrid Interaction Ltd. hahar Attias is a globally recognized iGaming expert with more than 15 years of industry experience. Attias is the founder and CEO of Hybrid Interaction Ltd., the muchin-demand online gambling consulting firm. His involvement in the gaming industry happened almost accidentally when his wife was offered a job in Antigua with 888. After she passed all the tests and was offered the job, 888 said they might as well see what kind of work they could have her husband do. After a few months of leading a variety of projects, Attias noticed a spike in activity whenever 888 sent out their biweekly newsletter. “I approached the board and asked permission to pick three employees and launch a player marketing department, and that’s how I established the firstever customer relationship management (CRM) team in iGaming history, simply going on a hunch,” he says. While in Antigua, Attias met the head of customer service at 888, Vahe Baloulian, an “Armenian, ex-Russian military, self-made internet entrepreneur, support strategist and one of the wisest people I have met,” says Attias. “I knew nothing about gambling at the time, and after a week in the position, (Baloulian) came to my office and asked my opinion on a certain game. When I said I didn’t know enough to say, he told me, ‘Well, go and learn.’” After about a month, Attias became the gaming expert in the company, and started training all the new employees. “(Baloulian) kept doing this with me—always pushing me to my limits not only during my time with 888, but afterwards as we’ve continued our friendship,” Attias says. Today, Baloulian is the CEO of BetConstruct, which is now one of Attias’ clients. Attias finds the most challenging aspect of the industry is keeping up with the rapid changes. For the number of years he has been in the gaming industry, he finds nothing that worked even two years ago is relevant anymore. “Much like fashion, iGaming trends from 2014 are considered so last year,” Attias playfully mentions. “There’s nothing like this crazy industry— every other line of business seems to be standing still

“There’s nothing like this crazy industry— every other line of business seems to be standing still in comparison to the dynamic evolution of iGaming.”

in comparison to the dynamic evolution of iGaming.” He believes even land-based gambling, which itself is ultra-challenging and action-packed, is relatively stable in comparison. “As someone once put it, our industry is like land-based gambling, only in dog years,” he says. Attias is a frequent speaker at events such as G2E, ICE Totally Gaming, iGamingAsia and others. He is the blogger behind iGamingCRM.com, and began his career in gaming operations and marketing in 2001 with 888. In the subsequent years, he served as vice president of casino operations for EuroPartners and was one of the founders of this leading Playtech licensee. Attias became the director of player relationship marketing for PokerStars in 2006, where he established and ran the CRM department. Starting in 2008, Attias opened his own consulting firm, providing customized solutions for such organizations as bwin.party, GVC Holdings, William Hill Online, Virgin Gaming, EZtrader and other online casinos. He also has extensive experience in assisting state-owned operators, such as the Austrian Lotteries and the Israel Sports Betting Board. Additionally, Attias provides customized solutions for organizations like Churchill Downs, SG Interactive’s B2C activity, Gioco Digitale and SkillOnNet’s B2B platform as well as the migration of the largest casino in Georgia to an online platform. The best advice Attias can offer is to be an expert in whatever you do and always be networking. He says it’s very important in such a small industry. “As Vahe told me in my first week, go and learn.” —Erika Meeske, The Innovation Group

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

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MAY 2015 www.ggbmagazine.com

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NEW GAME REVIEW by Frank Legato

King Cat

Ainsworth Game Technology

his, the latest game in Ainsworth’s successful “Sweet Zone” series, features wild reels that expand up to nine spaces high on a 32-inch vertical game screen. The slot is a follow-up to the popular titles Rumble Rumble and Flying Horse, featuring a two-level progressive jackpot. The base game is a five-reel, 50-line or 100line video slot, with the main feature in the primary game being the trademark “Sweet Zones”—groups of symbols on a reel framed by a blue or red border. When a diamond symbol appears in blue-bordered Sweet Zones on the second and fourth reels, all symbols on both reels turn into wild symbols. When the diamond appears in the red-bordered Sweet Zone on reel 2, all symbols on reels 1, 2 and 3 are transformed to wild. When the diamond appears in the red-bordered Sweet Zone on reel 4, all symbols on reels 3, 4 and 5 are transformed to wild. When the diamond appears in both Sweet Zones on

reels 2 and 4, the “Super Sweet Zone” feature is triggered, and the entire game array transforms to wild symbols. Three or more scattered bonus trigger symbols launch eight free games on an expanded game array of nine symbols on each of the five reels. Wild multipliers appear on the second and fourth reels during the free game feature, and any two or more scatters trigger an additional five free games. Manufacturer: Ainsworth Game Technology Platform: A560SL Format: Five-reel, 50-line or 100-line video slot Denomination: .01, .02, .05, .10, .25, .50, 1.00, 5.00, 10.00 Max Bet: 1,000 Top Award: Progressive; $4,500 reset Hit Frequency: Approximately 50% Theoretical Hold: Casino-selectable

Rising Fire Dragon Konami Gaming

his new Asian-themed game is one of two inaugural games on Konami’s innovative “Rapid Revolver” platform, which features an oversized hybrid mechanical top-box bonus apparatus consisting of six vertically mounted drums, surrounded by high-impact sound and lighting. The other launch game is Northern Treasure. The sound and lighting effects in the mechanical top-box display are synchronized to interact in real time with game actions on the main five-reel, 20-line video slot screen. The base game features unique wild spinning, stacked mechanical reels and a mystery two-level progressive jackpot. The cyclonic top reels in the top box spell out the random progressive jackpot. Dragon symbols scattered on the middle reels trigger a free-spin bonus event. Rising Fire Dragon is a medium-to-high volatility game with Asian art elements and a full-screen fire-breathing dragon character that ignites the reels with additional wild symbols during the free games. Northern Treasure is a medium volatility “Xtra Reward” game with bonus multipliers in the Revolver feature. Both Rapid Revolver debut themes are available in jurisdictions across the U.S.

Global Gaming Business MAY 2015

Manufacturer: Konami Gaming Platform: KP3 Format: Five-reel, 20-line video slot Denomination: .01, .02, .05, .10 Max Bet: 400, 500 Top Award: 100,000 (Rising Fire Dragon),180,000 (Northern Treasure) Hit Frequency: Approximately 35% Theoretical Hold: 5.90%-14.81%

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The Money Man Big Cash Spin Multimedia Games

his new video slot in Multimedia’s tall-top High Rise series plays on the “Money Man,” the host character featured in the company’s popular TournEvent tournament setup. The slot, a five-reel, 40-line video slot, features a video wheel spin bonus, multiple progressive jackpots and some entertaining mystery base-game events. Randomly after any winning spin during the base game, the Money Man character may appear and award a multiplier. After any losing spin, the Money Man can appear and award a bonus credit prize. On random spins, the Money Man will walk across the reels, tossing coins from his hat to turn random reel positions wild, or he could turn the complete first two reels wild. The seven progressive jackpots are won through the main Big Cash Spin bonus

event. When Cash Spin symbols land on reels 1, 3 and 5, they turn into Big Cash Spin symbols and trigger the Big Cash Spin bonus. Spinning the wheel can award credit prizes of 25-250 credits times the bet per line, or one of the seven progressive jackpots, including the top prize, which resets at $10,000. Landing on a credit prize in the wheel spin earns the player another spin of the wheel. Two Cash Spin symbols on Reels 1, 3 and 5 award the player one spin of the wheel. Manufacturer: Multimedia Games Platform: High Rise Format: Five-reel, 40-line video slot Denomination: .01, .02, .05 Max Bet: 160 Top Award: 1,002,700 Hit Frequency: 35.35%-43.8% Theoretical Hold: 1.93%-14.94%

Wild Dance Fire Aruze Gaming America

his is a new five-reel stepper game on Aruze’s popular Innovator With Radiant Reels series, the five-reel series that features large spinning reels—18.1 inches across, with each reel strip measuring 3.54 inches, the largest reels in the business for this type of slot. Innovator also features elements that offer a wealth of visual fireworks to keep things entertaining. The reels are backed by multi-colored LEDs, they are surrounded by light colors, and they spin at various speeds, forward and backwards. The theme depicts tribal Amazon dance rituals in a five-reel, 30-line base-game format. Multiple tribal dance animations accent base-game stacked wild symbols and multiple interactive reel actions. The main bonus event is a free-spin round. Three scattered bonus symbols on the middle reels trigger five free games. During the free games, three consecutive stacked wild symbols appearing on the middle reels multiply line wins. Wilds appear in each of the five games. Animation of tribal men dancing on the top monitor to game music helps build anticipation in each of the free games. Although the free-spin bonus cannot be retriggered

Global Gaming Business MAY 2015

during a free-game spin, the combination of the stacked wild symbols on the middle reels and guaranteed wilds on each free spin ensure a consistently high bonus award for the game. Manufacturer: Aruze Gaming America Platform: Innovator With Radiant Reels Format: Five-reel, 30-line stepper slot Denomination: .01 Max Bet: 150, 300, 450, 600 Top Award: 1,000 credits times line bet Hit Frequency: Approximately 50% Theoretical Hold: 3.85%-12.98%

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GOODS&SERVICES

THE NEW IGT eading slot manufacturer International Game LGTECH Technology and lottery and gaming giant S.p.A. closed their much-anticipated merger last month, to the applause of Wall Street as the chairman of the newly merged company, International Game Technology Plc., rang the bell at the New York Stock Exchange. The acquisition of IGT by Italy-based GTECH creates one of the two new powerhouses of the gaming supply sector. GTECH, a leading supplier and operator of lotteries and VLTs in Italy, had already absorbed successful slot companies Atronic and Spielo International. Adding the world’s largest slot company affords a counterbalance to Scientific Games, GTECH’s traditional lottery industry rival that recently absorbed two other top-five slot companies, Bally Technologies and WMS Industries. The merger became effective at 12:01 a.m. on April 7. International Game Technology Plc. began trading last week on the New York Stock Exchange under the ticker symbol IGT. GTECH will be rebranded as IGT. The GTECH name will eventually disappear. As part of the sign changeover, the letters “IGT” will replace the blue “GTECH” letters at the top of the 13-story tower above GTECH’s current Rome and Providence, Rhode Island headquarters locations.

CORRECTION On page 52 of our April issue, our story on kiosk technology incorrectly stated that vendor Vantiv processes more than 20 billion payment transactions with more than $700 million in volume annually. Vantiv’s annual transactions exceed $700 billion in annual volume. We regret the error.

Global Gaming Business MAY 2015

Rome and Providence will become operating headquarters of the merged company, with worldwide corporate headquarters to be located in Las Vegas. IGT’s Reno facility will be the main manufacturing plant of the combined company. Providence will serve as North American headquarters for the lottery and gaming business units. Marco Sala, a longtime GTECH executive, is CEO of the newly merged IGT. Former IGT Chairman Phil Satre is chairman of the board of the new company, with former IGT CEO Patti Hart as vice chairman. In addition to Sala, the corporate leadership team will include Renato Ascoli, chief executive officer, North America Gaming/Interactive; Walter Bugno, CEO, international; Fabio Cairoli, CEO, Italy; Michael Chambrello, CEO, North America lottery; Alberto Fornaro, executive vice president and chief financial officer; Donald R. Sweitzer, chairman, IGT Corp. (North America) and senior public affairs adviser; and Robert Vincent, senior vice president, human resources and corporate communications. The company also unveiled a new logo April 7. The merged company is the world’s top gaming machine manufacturer and top lottery contractor in traditional lottery sales, instant tickets, scratch tickets and video lottery terminals in 41 U.S. states and more than 100 countries worldwide.

CADILLAC JACK GOES TO AGS

anada’s Amaya Inc. announced that it will sell its Georgia-based slot manufacturing subsidiary Cadillac Jack to Las Vegas-based AGS LLC, an affiliate of Apollo Global Management, for $379 million (C$476 million). The deal represents the combination of two traditionally strong Class II slot suppliers, each of which had made substantial inroads in traditional Class III gaming markets. It also marks yet another step in the overall consolidation of the slot supply sector, which has seen more major slot-manufacturing merger deals in the past two years than in the history of the industry, led by mega-deals in which Bally Technologies, WMS and SHFL entertainment were swallowed by lottery giant Scientific Games and its lottery competitor GTECH acquired leading slot-maker IGT. For AGS, formerly known as American Gaming Systems, it marks the second major acquisition in as many years, as the company seeks to carve a larger share of the U.S. slot market. Since the acquisition of AGS by Apollo at the end of 2013 and the installment a few months later of David Lopez as CEO, AGS has taken an aggres-

sive growth stance. Last year, the company acquired Colossal Gaming, the company founded by gaming legend Steve Weiss. The company is still combining the Colossal slot platform with the Roadrunner platform the company developed under former CEO Bob Miodunski, the longtime Bally CEO who was hired in 2010. The purchase of Cadillac Jack—which currently has more than 13,000 games installed in casinos and a library of 165 game titles—adds another layer of technology to AGS, and another slot line that has performed consistently well in Class II markets including Oklahoma and Mexico. The deal also represents Amaya’s ongoing effort to clear the decks of its land-based slot businesses to focus on the growth of PokerStars, the leading online gaming operator the company acquired last year, which has caused a nearly eight-fold increase in adjusted earnings. Recently, the company announced it is spinning off its Diamond Game Enterprises video lottery subsidiary through an initial public offering of the newly formed Innova Gaming Group.

AGA SPOTLIGHTS LAS VEGAS SECURITY, REPORTING LIMITS n a recent conference call with reporters, Geoff ItheFreeman, president and chief executive officer of American Gaming Association, discussed the organization’s aggressive agenda for the near future, including gaining more security funding for Las Vegas and opposing the Internal Revenue Service’s proposal to lower jackpot reporting amounts. Freeman also said the AGA will add 11 new members to help unify the gaming industry. Freeman said he sent a letter to the Nevada congressional delegation in early March, noting the Department of Homeland Security’s Urban Areas Security Initiative “does not adequately take into consideration Las American Gaming Association Vegas’ unique proPresident Geoff Freeman file as a major inter-

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national travel destination.” Also, Freeman said “the industry is aligned” in opposing the Internal Revenue Service’s proposal to lower from $1,200 to $600 the amount required for reporting a slot player’s name, address and Social Security number, to assure taxes are paid on the jackpot. Freeman said the idea “seemed to come a bit out of left field” as Washington seeks “new revenue through creative thinking.” He noted the reporting threshold had not been reviewed since Jimmy Carter was president and Saturday Night Fever was on the screen. AGA spokesman Christopher Moyer noted as the required forms are filled out, the machine is taken out of action and players can’t gamble. “That’s time a casino isn’t earning revenue, and as a result the state isn’t earning revenue,” he said. In addition, Freeman said the AGA is adding 11 new members, including Ho-Chunk Gaming of Wisconsin, the group’s second tribal member after Seminole Hard Rock Gaming, announced in January when nine new members were added. “Bringing this industry together is one of the absolute most important things we can do. These new members make our organization, and the gaming industry, even stronger,” Freeman stated. “The budding coalescence of the gaming industry and wave of interest in the AGA strengthens our ability to share gaming’s story and effectively advocate in Washington, state capitals and developing gaming markets around the globe.” The AGA’s five new board members are the Cosmopolitan of Las Vegas, Global Cash Access, Cordish Companies, Novomatic Group and Vantiv Gaming. Six new general members are Casino City Press, Fantini Research, FPL Advisory Group, Ho-Chunk Gaming, Ortiz Gaming and YWS Design & Architecture.

INTERBLOCK INSTALLS E-TABLES AT CENTURY DOWNS ulti-player electronic table game supplier M Interblock announced that its products are the first electronic gaming table games (ETG) installed at the new Century Downs Racetrack and Casino in Rocky View County, just north of Calgary, Alberta, Canada. The property officially opened its doors on April 1 with 32 Interblock ETG seats, including the first Touchdown Roulette side bet in Canada. Bet Rite Inc. is Interblock’s exclusive sales

and service provider in Canada. “We are very pleased to expand the Interblock footprint in the province of Alberta and introduce more customers to Interblock’s world-class electronic table games,” said Richard Cone, president of Bet Rite Inc. Century Downs featured an Interblock promotion on April 7, 8 and 9, offering players the opportunity to learn how to play roulette, blackjack, baccarat, craps and sic bo on ETGs.

NYX GETS CLOSER TO AMAYA YX Gaming Group Limited last month anN nounced that it had entered into a share purchase agreement to acquire the entire issued share capital of Amaya (Alberta) Inc., formerly Chartwell Technology Inc. and CryptoLogic Limited, each of which is a wholly owned subsidiary of Amaya Inc. Earlier this year, Amaya announced its intention to divest the B2B business and its other non-core B2B NYX CEO Matt Davey assets in order to pay down debt and/or buy back shares. Amaya had previously granted NYX a right-of-first-offer to acquire the B2B business concurrent with Amaya’s sale of Ongame Network Ltd. to NYX in November 2014. NYX will acquire the B2B business for C$150 million (US$119 million) in cash, subject to working capital adjustments. The B2B business is being acquired on a cash-free, debt-free basis. The acquisition is anticipated to close before the end of the third quarter of 2015 and is subject to financing and other customary closing conditions. As part of the acquisition, on closing NYX will enter into a preferred supplier licensing agreement with a subsidiary of Amaya to provide certain casino gaming content to Amaya’s real-money casino offering,

which will be integrated into the PokerStars and Full Tilt branded casino websites. “We are excited about this acquisition and partnership, which will provide NYX with additional leading gaming content and access to what we believe will be one of the world’s fastest growing online casinos,” said Matt Davey, CEO of NYX. “As part of our agreement to acquire Ongame we negotiated a right of first offer to purchase the Cryptologic and Chartwell business, as we saw it as highly strategic to our existing business. This transaction completes the strategy we embarked upon with Ongame. We believe there to be a substantial growth opportunity in the PokerStars and Full Tilt casino offering, which we anticipate benefiting from as part of our licensing agreement with Amaya. We have substantial equity and debt financing options available to us to fund the acquisition.” “We are pleased to further deepen our relationship with NYX as a strategic partner and supplier to our B2C online casino operations,” said David Baazov, CEO of Amaya. “This transaction is consistent with our stated strategy of divesting our non-core B2B assets, while still giving us the ability to offer popular games and new and innovative titles on a regular basis from Chartwell, CryptoLogic, and now NYX.”

DUETTO ADDS TECHNOLOGY uetto, a market leader in hotel profit optimizaD tion technology, announced that its revenue strategy solutions have been fully integrated with Trust International’s CRS technology, making Duetto’s insights on pricing and demand available to more than 6,700 hotels in 62 hotel groups around the world. “We are happy to announce this partnership with Trust International, one of the world’s leading CRS providers and international hospitality partners,” said Patrick Bosworth, Duetto’s CEO and co-founder. “Today more than ever, hotels in all segments and in all markets are looking for solutions that allow for flexibility to fully optimize revenue and manage distribution complexity. We provide that solution, and look forward to working with Trust International and its hotels to ensure they never leave money on the table again.” Duetto opened its Europe and Asia Pacific headquarters in the fourth quarter of last year and is rapidly expanding worldwide. Duetto’s revenue strategy solutions are deployed at hundreds of hotel and casino properties in 19 countries.

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NIGA

Celebrates Successful Show

he Indian Gaming tradeshow became part of the National Indian Gaming Association’s 30year history early on, but the one held last month in San Diego was like no other. The anniversary marked a significant change in policy for the trade show, which permitted exhibitors to give unlimited free tickets to the exhibit floor, resulting in a big uptick in attendance. And a revamped conference program brought education and information to a tribal community that always soaks it up. The week began with the traditional three golf tournaments at courses owned by area tribes. The Chairman’s and Vice-Chairman’s Tournaments were held at the Sycuan Band of the Kumeyaay Nation’s Sycuan Golf Resort. The Sovereignty Tournament took place at the Barona Band of Mission Indian’s Barona Creek Golf Club. The day also featured a full conference program, and concluded with a welcome reception around the pool at the Manchester Hyatt. Tuesday featured another full day of conference sessions, again with record attendance. A cultural reception wrapped up the day, where the Tim Wapato Sovereign Warrior Award was presented to Melanie Benjamin, chief executive of Mille Lacs Band of Ojibwe. The award is an honor given by NIGA to someone carrying on Wapato’s message of determination and powerful advocacy. Wapato was a former executive director of NIGA and had an illustrious career from being a Los Angeles Police detective to his work with his own tribe in Colville, Washington, to his powerful presence in Washington, D.C. As she accepted her award, Benjamin thanked NIGA and the Wapato family and said, “I’m deeply honored to receive this award in the name of one of our greatest modern-day warriors, Tim Wapato. This award being on cultural night makes it even more special for me because of the connection between culture and tribal sovereignty.” 68

Global Gaming Business MAY 2015

At the NIGA Membership Meeting held that day, the NIGA board of directors held its elections for the NIGA chairman and secretary positions, where current Chairman Ernie Stevens and Secretary Paulette Jordan were elected uncontested. John Echohawk did the honors of swearing in Stevens, who accepted the position and reminisced of carrying the weight of Indian Country on his shoulder as a boxer, and how he’s proud to be doing so now in his eighth consecutive term as the NIGA chairman, spanning the past 15 years. The first day of the trade show itself kicked off with an address by the Interior Department’s Assistant Secretary for Indian Affairs Kevin Washburn, who explained what his agency has accomplished over the first six years of the Obama administration and what they hope to accomplish going forward. A ribbon-cutting followed, featuring many tribal leaders, as well as celebrities including former Los Angeles Lakers stars Bill Walton and AC Green. Moments later, another Laker great, Kareem Abdul Jabbar, spent two hours signing autographs in the booth of Aristocrat Technologies.

LA Lakers legend Bill Walton helped NIGA Chairman Ernie Stevens open the trade show floor, while another Laker great, Kareem Abdul Jabbar, appeared with CEO Jamie Odell at the Aristocrat booth to greet customers

After a busy first day, the Association of Gaming Equipment Manufacturers held a reception on the trade show floor. The day concluded with the 17th annual Wendell Chino Humanitarian Awards Banquet, honoring W. Ron Allen, tribal chairman and CEO of the Jamestown S’Klallam tribe, also the longtime head of the Washington Indian Gaming Association. The final day of the event opened with a panel discussing “The Future of Indian Gaming.” The panel was moderated by Mark Macarro, tribal chairman of the Pechanga Band of Luisueño Indians, and included Felix Rappaport, president and CEO, Foxwoods Resort Casino; Joe Nayquonabe Jr., commissioner of corporate affairs, Mille Lacs Band of Ojibwe; Rosemary Morillo, chairwoman of Soboba Band of Luiseño Indians and Kevin Brown, chairman, Mohegan Tribe. After the trade show floor closed, Stevens called it one of the most successful shows of his tenure.

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PEOPLE REID RESIGNS

arry Reid, a former chairman of the Nevada Gaming Commission, announced last month that he will not seek re-election as the senior senator from his state. Democrat Reid was majority leader of Harry Reid the Senate until this year, when the Republicans won the majority. Still, Reid has used his position as minority leader to keep the Democrats in line and fight off attempts by Republicans to repeal or soften many programs passed during the Obama administration. For gaming, it’s a huge loss. Reid, 75, has been the industry’s most powerful advocate through the years, particularly for the Nevada branch. He fought the growth of tribal gaming until the major commercial companies got involved. He has battled against proposed legislation that would have harmed the industry. In the late 1990s, when Congress set up the National Gambling Impact Study Commission, designed to skewer the industry, he helped to mollify the impact by getting industry figures like the late Terry Lanni from MGM and UNITE HERE head John Wilhelm confirmed as members. His relationship with industry leaders has been strong, even though they may have different overall political views. Steve Wynn and Sheldon Adelson, staunch conservatives, call Reid a friend. American Gaming Association President and CEO Geoff Freeman recognized Reid’s importance to gaming. “Senator Reid has been a tireless supporter of gaming who solidified Nevada and the industry’s significance across the country,” he said in a statement. “From his earliest days as chairman of the Nevada Gaming Commission to his years in the United States Senate, Senator Reid has been a visionary for what could be possible. The people of Nevada have been fortunate to have an unmatched champion in Senator Reid, whose leadership and dedication will be missed.”

WALKER REPLACED AT SENECA BY OSWELL

he Seneca Gaming Corp. will replace President and CEO Catherine Walker with Audrey Oswell. Seneca Gaming, based in Niagara Falls, runs the Seneca Niagara Casino in Niagara Falls, in addition to gambling facilities in Salamanca and Buffalo.

Catherine Walker

Oswell came on board with Seneca Gaming in 2013 as COO, with a healthy resume consisting of over 30 years of industry experience. Previously, she held roles as chief gaming officer at Atlantis, on Paradise Island in the Bahamas, in addition to senior management roles at Resorts and Caesars in Atlantic City, and the Cosmopolitan in Las Vegas. Walker came in as COO of Seneca Gaming in 2008, and in 2009 was named the company’s acting principal executive officer. The following summer Walker became president and CEO. For now, Oswell will also remain COO and add the other responsibilities, said Phil Pantano, a Seneca Gaming spokesman.

FOUR WINDS FINDS FREEDMAN

he Pokagon Band of Potawatomi Indians has appointed a successor for its Four Winds Casinos chief Frank Freedman operating officer, and it didn’t have to look far. Frank Freedman, who previously served as assistant general manager of Four Winds Buffalo and general manager of Four Winds Hartford and Four Winds Dowagiac, will succeed Matt Harkness, who is leaving to pursue other interests. “Matt Harkness and Frank Freedman have played very important roles in the development, growth and success of our Four Winds Casinos,” said John P. Warren, chairman of the Pokagon Band of Potawatomi Indians. “On behalf of the Tribal Council, Gaming Authority and all Pokagon citizens, we sincerely thank Matt for his hard work, dedication and leadership over the past eight years, and we wish him all the best in his future endeavors. He will truly be missed.” Four Winds Casinos received 56 industry and regional awards for its gaming, hotel, restaurants and other amenities in 2014.

INTERBLOCK NAMES NORTH AMERICAN HEAD, MARKETING VP

lovenia-based gaming equipment supplier Interblock Gaming has named Rob Bone as president of the company’s North America division, where he will oversee Rob Bone sales and strategies in the U.S. and Canada. The company has also appointed longtime marketing executive Colleen McKenna as the com-

pany’s new vice president of marketing. Bone has nearly 20 years of experience in the gaming industry, working in both the gaming equipment and casino operations sides of the Colleen McKenna business. Bone spent 14 years with WMS Gaming, prior to the slot company’s sale to Scientific Games. Last year, he joined Global Cash Access, where he oversaw the company’s marketing and product management divisions. Bone said he is looking to grow Interblock’s electronic table game business in the U.S. and Canada. McKenna, who has 20 years of corporate and agency marketing experience, most recently was marketing director for Symantec, a Fortune 500 company and the fifth-largest software company in the world. In 17 years at Symantec, McKenna was recognized as an innovative marketer, leading trend-setting initiatives that leveraged creativity and entertainment to reach new customer segments and extend the brand.

GGB

May 2015 Index of Advertisers

AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 AGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29 Ainsworth . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . .14, 15 Aruze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Casino City Press . . . . . . . . . . . . . . . . . . . . . . .59 Casino Data Imaging . . . . . . . . . . . . . . . . . . . . .35 CPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 Cuningham Group Architects . .Inside Back Cover DataSpade . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 Fabicash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 Franz Harary Productions . . . . . . . . . . . . . . . . .41 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57, 63 G2E Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 GCA + Multimedia Games . . . . . . . . . . . . . . . .17 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Greenberg Traurig . . . . . . . . . . . . . . . . . . . . . .25 GTECH/IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 IAGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Incredible Technologies . . . . . . . . . . . . . . . . . .39 Indian Country Online conference . . . . . . . . . .65 Innovation Group . . . . . . . . . . . . . . . . . . . . . . .47 Konami Gaming . . . . . . . . . . . . . . . . .Back Cover Rainmaker . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 Red Square Gaming . . . . . . . . . . . . . . . . . . . . . .9 RPM Advertising . . . . . . . . . . . . . . . . . . . . . . . . .7 Rymax Marketing . . . . . . . . . . . . . . . . . . . . . . .45 Scientific Games . . . . . . . . . . . . . . . . . . . . . . . . .2 TCSJohnHuxley . . . . . . . . . . . . . . . . . . . . . . . . .43 UNLV Foundation . . . . . . . . . . . . . . . . . . . . . . .32 UNLV School of Law . . . . . . . . . . . . . . . . . . . . .61

MAY 2015 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Jonadev Chaudhuri Chairman, National Indian Gaming Commission

fter two nomination hearings, Jonadev Chaudhuri was finally approved by the U.S. Senate to become the chairman of the National Indian Gaming Commission. He has been serving on the commission for well over a year, but some procedural issues delayed his appointment as chairman. Now in the hot seat, Chaudhuri has been campaigning on the effectiveness of the NIGC under the Obama administration despite fewer NOVs (notices of violations). He says the agency’s focus on training has reduced these kinds of incidents. He spoke with GGB Publisher Roger Gros at the annual Indian Gaming tradeshow in San Diego in early April. To hear a full podcast of this interview, visit ggbmagazine.com. GGB: Under IGRA, the NIGC was established to be an independent agency, totally separate from other departments. But in the past few years, the ties to the Interior Department seem to have deepened. Explain what your relationship is with Interior today.

to implementing IGRA to the best of our abilities. Former Chairman Phil Hogen tried to draw what he called a “bright line” between the two classifications of gaming, by strictly defining certain standards of games and how they are played. Is that something you’re backing away from at this point?

Well, I wouldn’t say we’re backing away from anything. We take very seriously our day-today responsibility of implementing IGRA. So, while I absolutely respect Chairman Hogen’s efforts to create a bright line regarding game classification, I also recognize that regardless of how bright that line may be under the law— and IGRA is pretty specific regarding its definitions of Class II and Class III gaming—you still always have to apply the facts of a given situation to the law. And so, while it may be helpful to think of bright lines in terms of the law, every classification that comes to the NIGC is very fact-dependent, and we review fact-dependent issues on a case-by-case basis.

Jonadev Chaudhuri: We are an independent

regulatory agency, committed to performing our independent regulatory mission, as set forth under IGRA. That said, I think it just makes sense to have as open and strong dialogue with regulatory partners as you can have. So, whether it’s DOI where we work together with on many issues, or other agencies within the federal family, we’re committed to open dialogue. By extension, that’s also true with other regulatory partners in the field—tribal regulatory partners, and in particular circumstances, states as well. I’m committed to doing whatever I can to strengthen our dialogue with our partners. The NIGC clearly has jurisdiction over Class II gaming. What’s your approach to Class III oversight?

IGRA is pretty specific regarding our role with Class III gaming, and we are committed 70

Global Gaming Business MAY 2015

The General Accounting Office is completing an audit of NIGC regulatory actions over the past few years. We’ve had some experts tell us, and we’ve reported that these actions will be shown to have been dramatically decreased over the past administrations. Explain why that is.

I’m not sure, in terms of the way you framed your question, whether or not there will be a showing of a reduction of regulatory actions. As I’ve said repeatedly, we are absolutely committed to doing everything we can both on the front end and on the back end, to achieve compliance with federal law. I think that’s the ultimate goal of IGRA. So with that in mind, all of our efforts aimed at training and technical assistance, I would suggest are regulatory actions. I think what you may be referring to are certain types of enforcement actions regarding closure

orders or fines, but I would absolutely say every time we do a compliance review, or every time we do a training, or every time we provide technical assistance, that’s regulatory activity targeted toward compliance as well. Explain how tribal gaming commissions play a part in this patchwork of regulatory laws.

I think IGRA clearly contemplates tribal regulators as the primary regulators of Indian gaming. Certainly there’s a role for NIGC as the federal regulator, and given the facets of the given compact, states play a role as well. But IGRA itself recognizes tribes as the primary regulators of Indian gaming. And I think everybody involved in the industry has embraced that concept. I think they have been effective regulators. We certainly are mindful of our oversight role, but back to this idea of using every tool in your toolbox to achieve compliance when you’re performing your oversight rule, that’s what we’re about. Another tool in the toolbox you’re using very effectively right now is the training and certification for the tribes. Explain how that’s improving the regulation at the tribal level.

I’m still relatively new to the commission. I joined in 2013. In 2013, we trained more tribal regulatory partners than as an agency we had ever trained before, historically. That’s just a fact. And we did so at more training events than we’d ever conducted in the past. That was 2013. In 2014, we bettered that—we trained more people at more training events than we had ever trained before. And we’re certainly on pace to even better that. In order to have strong regulation, you have to have a properly trained workforce. Not just at NIGC, but among our regulatory partners. So training is and always will be part of what we do. And it’s contemplated in IGRA that we provide training and technical assistance as well. So we see it as a fundamental pillar of our statutory mission.

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