Global gaming business magazine, dec 2013 by Global Gaming Business

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CONTENTS

Vol. 12 • No. 12

december

Global Gaming Business Magazine

COLUMNS

COVER STORY Page 22

On to 2014

14 AGA Creating Perceptions from Reality

Our annual look at the crystal ball for the coming year to analyze the top trends can help all the players in the industry be prepared for a wide range of important developments that are impending. This year’s “Top 10 Trends” examine a range of issues, including the growing prevalence of entertainment-based themes on the slot floor, continuing problems with the perceived image of gaming, and several issues tied to the emerging internet gaming market in the U.S.

Geoff Freeman

16 Fantini’s Finance Floating in Macau Frank Fantini

34 Global Gaming Women Dos and Don’ts Hilary Stewart-Jones

60 Operations Expect the Unexpected

By Roger Gros, Frank Fantini, Frank Legato, Dave Palermo, Marjorie Preston, Patrick Roberts and Dr. Katherine Spilde

Tom Brosig

DEPARTMENTS

FEATURES

GGB iGAMES

18 Testing Taiwan Observers of the Asian gaming market have noted a possible shifting of opinions on whether the Taiwan government will allow casinos on its main island.

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

By Anita Chen

One of the most critical issues in the outlook of new U.S. internet gaming markets is payment processing, and how it will develop in the postUIGEA world.

iGNA Outlook 40 The Legality of Social Gaming Tony Cabot

48 New Game Review 49 Cutting Edge 54 Emerging Leaders With Pechanga’s Cary Conrady, Las Vegas Sands’ J.T. Foley, and Crown’s Clayton Peister

58 Frankly Speaking 62 Goods & Services

42 iGames News Roundup

By Dave Bontempo and Frank Legato

6 Dateline 13 Nutshell

FEATURE 36 Paying to Play

By Marco Valerio

44 Almost Live Automated electronic table games, or “e-tables,” give operators and players a costefficient option to augment the live tables in the pit.

4 The Agenda

65 People

50 Tracking the Player The latest player tracking systems allow operators to keep track of customers’ gaming and non-gaming spend.

66 Casino Communications With Maurilio Silva, President and CEO, Ortiz Gaming

By Rodric J. Hurdle-Bradford DECEMBER 2013 www.ggbmagazine.com

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THE AGENDA

Regulatory Revolution Roger Gros, Publisher

hen I was in Atlantic City over the summer, I met with many of my casino executive friends there. As usual in New Jersey, the conversations always turn to regulations. As someone who cut his teeth on gaming in Atlantic City, the regulations were always the city’s Achilles’ Heel. No matter how much they would try to reform the regulatory process, it was never enough. Regulations were still onerous, time consuming and costly for 30 years… until Governor Chris Christie instituted real reform. Christie’s plan dramatically restructured the state regulatory system, giving the Division of Gaming Enforcement clear investigatory power, with the authority to recommend any action. The Casino Control Commission was responsible for rendering the decisions suggested by the DGE. Although the CCC could disagree with the DGE, those instances would be rare since the CCC had no investigatory arm. The first director of the DGE in this era is David Rebuck, a former assistant attorney general. And it’s here where my discussions with the Atlantic City casino execs took a dramatic turn from the days of yore, when the nicest thing any casino exec could say about a regulator is that he or she was tolerable. But the comments I got about Rebuck were uniformly positive. They said he “gets it” when it comes to the balance of integrity and business decisions, something previous regulators didn’t understand. In Nevada, this attitude toward regulators is commonplace because there is a common interest in strengthening the industry, both in its integrity and in its business success. But look north to Massachusetts and you see the traditional adversarial relationship between regulators and operators. This was the attitude New Jersey took toward operators when it started regulating in 1978. But that was understandable. Nevada was just then cleaning up its house of dirty characters, and New Jersey didn’t want to start allowing them. But today, we have almost 50 years of clear, concise regulations… 50 years of understanding how to regulate a cooperative industry… and 50 years of experience so we understand what works and what doesn’t. And what doesn’t work, if you want a regulatory system that promotes integrity but also brings to the jurisdiction the appropriate results, is an adversarial attitude. Steve Wynn scolded the Bay State regulators last month for overreaching and acting like “freshmen.” “We find ourselves being treated, in many respects,

as if they are doing us a favor,” he said. Caesars Entertainment Chairman and CEO Gary Loveman reacted in a similar manner after his company was forced out of a partnership in Boston after a report to the commission by an outside consultant cited many factors that were either irrelevant or settled, with no opportunity for Caesars to contest the findings. “I’m deeply disappointed and frankly angry about this outcome as it’s inconsistent with our experience in every jurisdiction in which we’ve operated,” Loveman said. Unfortunately, Massachusetts is not alone. Just ask operators in Pennsylvania, Illinois, Missouri or other states that believe they have something to prove by cracking down on companies that have invested billions of dollars and employ thousands of people in their jurisdictions. The proper role of a regulator is to ensure that the games are being conducted with integrity and customers are getting a fair shake. Examine the finances of the operator and the major investors to be certain that they can pay contractors, winning players and the state. Make sure that there is no criminal activity by the operators and the owners. But don’t worry about other jurisdictions if the company complies with all the existing regulations in those areas. If an executive has been licensed in multiple jurisdictions, there’s probably nothing left to uncover. And don’t overlook the commitment to the community those companies and executives exhibit because you want the same thing in your region. Regulation is a funny thing. It’s a revolving door. A regulator’s term is usually very short, anywhere from two to four years. There’s very little time to ramp up and learn about an industry that most of them barely understand. Guidance is important, and when a consultant fails to do their job and doesn’t explain context or history, a “freshman” regulator may jump to illogical conclusions. There needs to be a standard based on years of experience and history that a regulator can apply from day one. Sure, there is plenty of nuance and a regulator will learn that over time. But let’s start with a basic background that can be accepted by regulators across the board. If there are more questions, regulators can call the applicant in to explain. But to make judgments without the applicant’s feedback is dangerous and unnecessary. Let’s fix this before it gets out of hand.

Global Gaming Business DECEMBER 2013

Vol. 12 • No. 12 • December 2013 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com David Coheen, North American Sales & Marketing Director dcoheen@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com Becky Kingman-Gros, Director of Operations bkingros@ggbmagazine.com Lisa Johnson, Communications Advisor lisa@lisajohnsoncommunications.com Columnists Tom Brosig | Tony Cabot | Frank Fantini Geoff Freeman | Hilary Stewart-Jones Contributing Editors Kimberly Arnold | Dave Bontempo | Anita Chen Frank Fantini | Rodric Hurdle-Bradford | Dave Palermo Marjorie Preston | David Rittvo | Patrick Roberts Robert Rossiello | Dr. Katherine Spilde Cameron Steinagel | Marco Valerio

EDITORIAL ADVISORY BOARD Mark A. Birtha, Vice President and General Manager, Fiesta Henderson Casino Hotel

• Geoff Freeman, President & CEO, American Gaming Association

• Julie Brinkerhoff-Jacobs, President, Lifescapes International

• Nicholas Casiello Jr., Shareholder, Fox Rothschild

• Jeffrey Compton, Publisher, CDC E-Reports

• Dean Macomber, President, Macomber International, Inc.

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

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

• Jim Rafferty, President, Rafferty & Associates

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

• Steven M. Rittvo, President, The Innovation Group

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

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

• Roy Student, President, Applied Management Strategies

• David D. Waddell, Partner Regulatory Management Counselors PC Casino Connection International LLC. 921 American Pacific Dr, Suite 304, Henderson, NV 89014 702-248-1565 • 702-248-1567 (fax) www.ggbmagazine.com The views and opinions expressed by the writers and columnists of GLOBAL GAMING BUSINESS are not necessarily the views of the publisher or editor. Copyright 2013 Global Gaming Business LLC. Las Vegas, Nev. 89118 GLOBAL GAMING BUSINESS is published monthly by Casino Connection International, LLC. Printed in Nevada, USA. Postmaster: Send Change of Address forms to: 921 American Pacific Dr, Suite 304, Henderson, NV 89014

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DATELINE ASIA december2013 Kazuo Okada

Split DeciSion

Okada takes offensive in Philippines

entury Properties Group, a Philippine developer, has concluded an agreement with a Philippine affiliate of Kazuo Okada’s Universal Entertainment Corp. that should go a long way toward allowing Universal’s planned US$2 billion resort casino in Manila to move forward. Century’s involvement with Eagle 1 Landholdings covers five hectares of the Japanese billionaire’s 44-hectare project and includes a separate deal to acquire a 36 percent interest in Eagle 1, the Universal affiliate that owns the site. Century said it would develop luxury retail and residential projects there and

will be issued 432 million preferred shares. No purchase price was disclosed, according to Reuters. “We see this as a great investment for our shareholders, but we will not be involved in any aspect of the gaming operations,” a Century spokeswoman said. The U.S. Federal Bureau of Investigation and its Philippine counterpart, the National Bureau of Investigation, have launched separate investigations of Okada and his companies in connection with bribery allegations.

Record Revenues

Pay Up or Get Out

Macau boom continues in October

aming revenue in Macau broke the US$4 billion mark in October, setting a new monthly record for the booming Chinese casino enclave. Official results supplied by the Gaming Inspection and Coordination Bureau show the take from tables and slots hit 36.5 billion patacas (US$4.57 billion), an increase of 31.7 percent over an easy October 2012 comp (plus 3.2 percent), but it was the strongest year-onyear growth rate to date for 2013 and shattered the previous all-time monthly revenue record of 31.3 billion ($3.9 billion) set in March of this year. Macau is already approaching last year’s total of $38 billion in gross gaming revenue with two months to go, and is up 18.4 percent over the first 10 months of 2012. “We are currently forecasting approximately MOP31 billion to MOP32 billion in GGR during November and December, driven by acrossthe-board strength in all relevant gaming segments,” said Union Gaming Research Macau in a note to investors. The firm noted that historical trends show average GGR in November and December generally coming in higher by 6 percent or more than the January-October GGR run rate. If that holds true, the total for 2013 should hit MOP360 billion ($45 billion), representing year-on-year growth of approximately 18 percent. “This suggests Macau GGR in 2013 will be seven times the likely Las Vegas Strip GGR of US$6.4 billion,” the firm said.

Universal has denied any wrongdoing and has moved further to solidify its standing in the Philippines through a separate sale of stock to a company called First Paramount Holdings 888. Combined with the Century deal, it places more than 60 percent of Eagle 1 in Philippine hands, a move that will “create a more favorable situation in response to the land ownership requirements,” Universal said.

In Nepal, it’s get licensed or else

epal’s Ministry of Culture, Tourism and Civil Aviation has given the country’s casinos less than a month to renew their licenses or face shutdown. None of the 10 casinos—eight in the capital of Katmandu, two in Pokhara—had renewed as of the end of October and several have not been paying taxes, the government says, and are therefore operating illegally. The venues owe the government more than 550 million rupees (US$5.6 million), according to the Inland Revenue Department, and the arrears are likely to grow as a result of a bill passed this year that doubles the annual license fee, or “royalty,” the casinos are required to pay to 40 million rupees. To obtain a license, operators are required to deposit with the Tourism Ministry one year’s royalty as a guarantee. The cost of obtaining a license is another 20 million rupees. They also must pay a license application fee of 500,000 rupees.

GLASS CEILING

The table cap that isn’t a cap

recent report from Morgan Stanley estimates that the number of live table games in Macau has risen 5 percent through the first nine months of the year, which appears to suggest that flexibility is possible in the government’s stated cap on new table supply of 3 percent a year. The report doesn’t explain the increase, but it has prompted speculation by English-language Macau Business Daily that the cap is not as rigid as it looks on paper. The allocation of live tables, the market’s dominant growth engine, is supposed to be calculated on a compound annual basis of 3 percent starting from the fourth quarter of 2012, when there were about 5,500 tables marketwide, and continue through 2022 when the last of the territory’s six casino concessions is slated to renew. The newspaper speculates that one reason for the 2 percent difference implied by Morgan Stanley is that “the number of tables in the possession of an operator could be greater or fewer than the number of tables recorded as its official ‘allocation.’ “Additionally, the number of tables any observer can physically count on the floor isn’t necessarily what the operator actually possesses. Some could be in storage or being used for training,” the paper said. It’s also known that operators are shifting tables among properties to maximize yield in an environment in which current demand far exceeds current supply. The paper also suggests the possibility the government will be flexible in how it defines the cap.

Global Gaming Business DECEMBER 2013

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DATELINE TRIBAL december2013

BIg aNd Brassy

California’s largest casino opens outside San Francisco

he Graton Resort & Casino in Rohnert Park, described as the “$800 million gorilla” by one industry analyst and easily California’s largest casino, built in what was once a cow pasture, opened last month to thousands of visitors from the Bay Area. At the direction of the fire marshal, the casino had to turn away hundreds of customers, even though it opened an hour ahead of schedule. The Graton casino opened an Traditional lion and dragon dances at all of hour early to satisfy a crowd the mega-casino’s three entrances greeted the first of thousands eager to see the visitors. new resort. An estimated 10,000 visitors had tramped through the casino by the end of the first day. California Highway Patrol officers along the famed Highway 101 monitored traffic that backed up for miles.

Supreme Confidence Focus builds on Bay Mills casino before high court s tension mounts leading up to arguments before the U.S. Supreme Court in Michigan v. Bay Mills, 63 Indian communities and U.S. Solicitor General Donald. B Verrilli Jr. have filed briefs in support of the Bay Mills Indian Community. The Bay Mills tribe opened an off-reservation casino near Vanderbilt in November 2010, but closed it in March 2011 after a series of legal challenges, including a lawsuit by the state of Michigan over whether the Michigan Attorney property can be a casino site. The tribe says since the General Bill Schuette land was purchased with funds it received from the Michigan Land Claims Settlement Act of 1997, a casino can be built on it without going through the usual process of first having it placed in federal trust. After nearly three years of legal challenges, the U.S. Supreme Court announced it would take on the case, on December 2. Michigan Attorney General Bill Schuette said this “sets the stage for an important discussion about the states’ ability to halt the unrestrained expansion of off-reservation tribal casino gambling.” In his first legal brief with the high court, Schuette wrote, “If state sovereignty means anything, it must include the ability to stop illegal conduct on lands under state jurisdiction. Bay Mills is allowed to break the law by opening casinos outside Indian lands; tribes that follow the law will be unfairly disadvantaged by illegal, competing casinos, or even encouraged to engage in the same unlawful behavior.” In response, a brief filed by the Bay Mills tribe stated, “This is one of the rare cases before this court that is squarely controlled by settled precedent. Michigan sued the Bay Mills Indian Community by name, seeking severe financial penalties and an injunction against the tribe. This court has repeatedly held that ‘an Indian tribe is subject to suit only where Congress has authorized the suit or the tribe has waived its immunity.’ Neither exception applies here: Congress has not abrogated Bay Mills’ immunity, and Bay Mills has not waived it. Michigan therefore cannot sue Bay Mills.”

The casino is about 50 miles from downtown San Francisco. It took some motorists driving on Highway 101 four hours to make a trip that normally takes about 45 minutes. Some of those abandoned their vehicles once they arrived in the town, parking on streets or in hotel parking lots, and made their way on foot to the casino. The new, 340,000-square-foot facility, open 24/7, has 3,000 slot machines, plus 144 blackjack and other table games. It also has seven restaurants, four of them full-service, one run by celebrity chef Martin Yan and another by Chef Douglas Keane. In a local twist, Sonoma and Napa wines will be featured in the lounges and bars. There is also a 500-seat food court. Owned by the Federated Indians of Graton Rancheria, managed and operated by Station Casinos under a seven-year contract, the new casino employs 2,000. There is no hotel, although the tribe may add one in the future. They have room. The casino is built on 254 acres purchased in 2005.

The New Buffalo 25 years of IGRA marked

ndian gaming marked its 25th anniversary this month, a quarter century after Congress passed and President Ronald Reagan Pala Chairman Robert signed the Indian Gaming Regulatory Act Smith says IGRA was an unqualified success. (IGRA). At the time, some tribal leaders considered the law as infringing on tribal sovereignty to conduct casino games on the reservation. It may infringe upon sovereignty, but the law also has proven a catalyst for a remarkable growth of a source of revenue that has wrought great changes for thousands of Indians all over the country. Last month, Robert Smith, chairman of the California Tribal Business Alliance, and also chairman of one of the most successful gaming tribes in America, the Pala Band, described IGRA as “the one federal Indian policy—amidst a host of failed policies that the federal government has tried to implement over the years—that has truly helped promote and strengthen economic development and self-determination among tribal governments.” The law came after the U.S. Supreme Court ruled in 1987 that states lacked the power to prevent tribes from conducting gaming, unless all gaming was prohibited in the state. IGRA was a reaction by Congress to allow states some regulatory control over the activity. It established three times of games, Class I, Class II and Class III, with different rules for each. Class I covers traditional Indian gaming. Class II includes games such as bingo or poker, while Class III includes casino games. IGRA also established the National Indian Gaming Commission to regulate Class II and III gaming on tribal land. DECEMBER 2013 www.ggbmagazine.com

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DATELINE USA december2013

7 Up in nY, 2 Down in MA Shocker: Caesars departs Boston

very election day has some impact on gaming, and this year’s off-year vote was no different. In Massachusetts, where local communities are required to approve gaming in their towns, voters in three towns went to the polls to voice their opinion, with some shocking results. New York, meanwhile, weighed a plan proposed by Governor Andrew Cuomo and passed by the state legislature to launch seven casinos in upstate New York. The plan blocks casinos in the New York City area for another seven years. And even Atlantic City got some good news in a non-gaming vote, with an improbable victory in a contest for mayor. As expected, New Yorkers overwhelmingly approved Governor Andrew Cuomo’s gaming expansion bill. Fifty-seven percent of voters supported the constitutional amendment that will permit seven Class III casinos in the state. Four licenses will be issued to operators in the economically challenged upstate region, which includes the Catskills, the Southern Tier and the Albany area. Three more

Downtown Grand Opens in Las Vegas Steve Wynn first gambler at city’s newest casino he new Downtown Grand in Las Vegas “is already becoming a gamechanger for the neighborhood,” according to a report in USA Today. The 634-room hotel-casino, which marked its soft opening in late October, was designed to interact with the surrounding neighborhood, not lure people in and close the door, said CEO Seth Schorr. Casinos on the Las Vegas Strip are “designed to keep guests in the building,” Schorr said. “We do the opposite. We encourage our guests to leave the casino.” Downtown Las Vegas has undergone a marked renaissance in recent years with the introduction of an outdoor entertainment corridor with bars and music; another new casino resort, the D Las Vegas, formerly Fitzgeralds; a renovated Golden Gate casino; and a steady migration of new businesses, principally online retail giant Zappos, which relocated its headquarters from Henderson to a former City Hall building. Zappos brought some 1,300 new employees to the Downtown region, many of whom plan to live there. The Downtown Grand formerly the Lady Luck held its grand opening November 12, but it has already won some big money from big-name players. Casino magnate Steve Wynn lost $5,000 at the craps table during the soft opening, and Seth Schorr’s father Marc, the former president of Wynn Resorts, also dropped a cool five grand.

Global Gaming Business DECEMBER 2013

Suffolk Downs, Boston

licenses will be awarded in seven years, once the first casinos are established. And eventually, one Vegas-style casino may be approved for New York City. In Massachusetts, voters handed casino developers two shocking electoral shellackings in November, rejecting a $1 billion proposal by Suffolk Downs for East Boston by a vote of 56-44 percent, and by the Mohegan Sun for Palmer in a squeaker where no votes outnumbered yes votes by less than 100 out of 5,200 cast. In the final days leading up to the election, polls in East Boston showed that 46 percent were opposed to the project, and 42 percent supported it. Although Mayor Thomas Menino had tried to get the election postponed after Caesars withdrew from the project, more than two-thirds of those surveyed felt that there was no need to delay the voting and that it would be fair despite the fact that Caesars was still mentioned in the election materials. About 100 acres of the proposed project are in East Boston and 50 acres in Revere. Some of that land once belonged to Wonderland Greyhound Park, which is located north of Suffolk Downs. In 2008, Suffolk Downs reached a partnership agreement with Wonderland to “share in future development,” according to Bloodhorse. “We’re working on it,” declared Suffolk CEO Chip Tuttle when asked about the possibility two days after the election. Reportedly his company would have until December 31 to come up with an alternative casino plan. The vote followed by 10 days a report to the state gaming commission that recommended that Caesars be denied a license for a variety of specious reasons. Caesars withdrew its application at the request of partner Suffolk Downs. MGM Resorts and its proposal for Springfield could be the only remaining bidder for the Western Zone license if the tiny vote margin in the town 20 miles away is not reversed during a recount. Mitchell Etess, chief executive officer of the Mohegan Tribal Gaming Authority, told reporters that his company is asking for a hand recount due to technical issues with one of the voting machines. Reportedly the machine jammed at some point, causing some ballots to spill. Although not an up-or-down vote on casinos, the results of last month’s election in Atlantic City should have a positive effect on the city’s casino industry. Longtime Mayor Lorenzo Langford was upset by political newcomer Don Guardian in a race that was decided by fewer 200 votes. Guardian became the first Republican since Atlantic City instituted partisan elections in 2000 to become mayor. In a town where Democrats outnumber Republicans by at least a 10-1 margin, it is a major accomplishment. Guardian should be able to forge a cooperative relationship with fellow Republican Governor Chris Christie, something Langford was unable to do.

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DATELINE GLOBAL december2013

Starting Over

Slots Suffer

Jamaica sets new deadline for casino bids amaica extended the deadline for developers interested in submitting proposals for integrated resorts on the Caribbean island nation to November. An exact date hadn’t been publicized as of yet. The previous deadline was September 30. Three licenses are open for bid for casinos with hotels of at least 2,000 rooms. They will be able to offer both slot machines Harmony Cove is expected to bid for a casino license in Jamaica. and table games with revenue taxed at 10 percent. Applicants must submit a formal business plan and be able to clearly show funding commitments. The subsequent review process is expected to take about four months with winning bidders announced in early to mid-2014. The government so far hasn’t identified any bids or expressions of interest, so it isn’t known if any major operators are involved. A project known as Harmony Cove, a joint venture between the government and Tavistock Group priced at US$800 million, is reported to be progressing on the island’s northern coast with plans calling for a luxury hotel, three golf courses, a water park and dining and retail attractions. The market currently consists of small venues mostly in the capital of Kingston operating machine games only.

Casino Explosion?

Machines targeted in Mexican crackdown

exico’s President Enrique Peña Nieto has issued a decree aimed at reining in the proliferation of slot machines in the country. Slots have been at the center of licensing abuses nationwide that have generated a spate Mexican President of scandals in recent years as their numbers have spread to the extent that they now crowd Enrique Peña Nieto the sidewalks in front of shops. The blame has focused on license holders, who have been renting or ceding operating rights to third parties, a practice that is prohibited under the decree, which also bans slots outside of licensed establishments and outlaws all so-called skillsbased games. The decree also shortens the duration of operating permits from 40 years to 25. Coin-operated video and charity games at fairs are exempted from the new rules. Las Vegas-based investment analysts Union Gaming Research, which covers the stocks of several major equipment manufacturers supplying the Mexican market, says the decree is not expected to affect suppliers, as they have been pulling games out in recent years in response to the murky regulatory environment and declining play levels. They are continuing to sell or lease a limited numbers of games, however. “While the current legal situation is a bit confusing we don’t think the crackdown is a major risk from an EPS perspective,” the firm said in a note to investors.

three new casino licenses. “The infrastructure that we have in this state is from a different era.” Queensland is also the nation’s most indebted n array of big-time investors, among them Australian casino state, with a deficit forecast at about $7.3 billion over giants Crown Resorts and Echo Entertainment Group, are the last year. The state has four casinos, three of them eyeing Queensland as the place to cash in on the Chinese tourism belonging to Echo Entertainment, which also owns Queensland Premier boom. the Star gaming resort on Sydney’s Darling Harbour, Campbell Newman Australia welcomes more travelers from China in a month but Newman believes the state needs more. than it did in an entire year two decades ago, and China is now Australia has not granted a new casino license the country’s biggest source of tourist revenue. “Whether they gamble or since 1996. But that’s changing. James Packer’s Crown, whose flagship Melnot, casinos are one of the prize attractions” for them, said Justine Chien, dibourne casino already controls most of the country’s trade in Asian high rector of Sydney-based tour agent Golden Dragon Travel. “They’ve all been rollers, is planning a $1.2 billion resort on Darling Harbour to compete with to Macau already. They want to see the different casinos around the world.” the Star, which is also aggressively pushing its VIP offering. Packer also is lobQueensland, more than twice the size of Texas and with a sea coast bying for a license to take on Echo in Queensland’s capital of Brisbane, where longer than India’s, is seeking to emulate Singapore, where tourism revenue Echo’s Treasury casino is the city’s sole operator. hit US$5.85 billion last year thanks to the two resort-scale casinos—Genting Queensland, meanwhile, is welcoming proposals for redeveloping a riverSingapore’s Resorts World Sentosa and Las Vegas Sands’ Marina Bay front site in Brisbane, and Newman says the state can support two additional Sands—that opened there in 2010. Singapore-style integrated resorts. Echo wants to have one of them. CEO “We’re in a global competition for tourists, and the offering we have at John Redmond says the Treasury is too small to attract enough tourists, and the moment, I’m afraid, is not up there with our competitors,” Premier the company is lobbying the government for permission to move to a larger Campbell Newman said in October in announcing plans to offer as many as site where it would like to invest about A$700 million.

Queensland prepares for a resort wave

Global Gaming Business DECEMBER 2013

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DATELINE EUROPE december2013

Table TrOuble E-table opposition spreads to Liverpool

ouncillors in Liverpool are calling for a ban on casino-style electronic table games in betting shops in the city. Councillor Nick Small has led the move with a motion for the national government to either ban the machines or give local councils the power to restrict how many betting shops can open in certain areas. “There’s hundreds of betting shops in Liverpool, and we just don’t have the power to control them,” he said. “Ultimately, we need power to reduce the speed of play and to bring down the maximum stake. At the moment, you can gamble £100 every 20 seconds. We need to change that.” But the Association of British Bookmakers says “no evidence” has been produced to show the machines cause problem gambling and has challenged estimates by opponents that upwards of £600 million a year is being gambled on them in Liverpool.

Hong Kong businessman Carson Yeung Ka Sing

Follow the Money Macau VIP operator and Birmingham football owner implicated ong Kong businessman Carson Yeung Ka Sing is charged with laundering HK$721 million (US$93 million) from 2001 through 2007, the money flowing through bank accounts registered to Yeung and his father, prosecutors say, to fund Yeung’s initial stake in Britain’s Birmingham City football club, which he bought in 2009 for £81.5 million (US$130.6 million). Birmingham International Holdings, the Hong Kong-listed entity that holds the controlling stake in the team, said in a recent filing that a forensic auditor hired to look into its financial dealings discovered that most of the known payments from Yeung involved money originating from undisclosed “third parties.” Yeung is on trial in Hong Kong, where testimony has focused on his ties to businessman Cheung Chi Tai, an alleged member of the Wo Hop To triad, from whom he received HK$20 million in 2007. Yeung told the court the money was related to an earlier $26.4 million investment he made in a Macau VIP room operated by Neptune, a Hong Konglisted junket promoter and investor that has in the past identified Cheung as an executive director. Yeung testified that he only knew Cheung as a business associate.

Global Gaming Business DECEMBER 2013

Proper Look British PM eyes FOBTs

.K. Prime Minister David Cameron says he will consider whether to support restrictions on British Prime Minister David Cameron casino-style electronic table games in betting shops. Cameron, who said he has been lobbied by MPs on all sides, stated, “I do think it is worth having a proper look at this issue, to see what we can do to make sure that, yes, we have bookmakers that are not over-regulated, but, on the other hand, a fair approach and a decent approach that prevents problem gambling.” Adrian Parkinson of the Campaign for Fairer Gambling, a grassroots group that opposes the proliferation of the games, known as fixed-odds betting terminals, said, “It was a pretty vague answer, but at least it’s on his agenda.” Cameron made the statement in response to a query from Labor MP Tom Watson during Prime Minister’s Questions in Parliament. Watson has added his voice to a growing chorus of critics of the devices, which can accept stakes up to £100 and have transformed the “local bookies” into “High Street digital casinos,” as he put it. He called on the government to follow Ireland’s example by banning them.

Three Goes Into One Cyprus OKs one license, three casinos

he government of Cyprus has cleared the way for the introduction of three casinos to the Mediterranean island nation that will operate under a single license. The decision resolves a dispute between a number of towns and the cabinet of President Nicos Anastasiades over whether to authorize a single integrated resort or permit several local licenses for smaller operations. Cyprus President “We are satisfied with our meeting Nicos Anastasiades with the president and the way he is handling the issue of creating a casino,” said Mayor Savvas Vergas of the town of Paphos. “It seems that very soon, the consultant who will set the terms of the procedure for finding an investor will be appointed.” The license will allow the developer to choose the central location and operate branches in two other regions fairly close to the main one. “That is to say that the investor will have the right to create small casinos that can start operations before the major casino,” Vergas explained.

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NUTSHELL

“They A report in Japan’s Nikkan Gendai newspaper says a new poll shows 58 percent of Japanese opposed to casinos versus 42 percent who support them. The main reasons for those giving negative responses were: “Will jeopardize public safety (40 percent); more people will become addicted to gambling (31 percent); not interested in going to such places (15 percent); in any event, I’ll lose money (8 percent); will tarnish the locale” (4 percent); and “will cause number of suicides to rise” (2 percent). Those in favor of casinos cited the economic benefits, the attraction for foreign tourists and new employment opportunities. Though a marketing push to attract local gamblers to Atlantic City’s struggling Atlantic Club casino has worked, the increased revenue was not enough to keep the casino from filing for bankruptcy protection last month. The casino will remain open while its owner, California buyout firm Colony Capital LLC, seeks a buyer. Michael Frawley, the casino’s chief operating officer, told the Associated Press that a strategy of offering low-priced gambling, food and entertainment in an effort to attract local players has been working, but revenue has not increased fast enough in the troubled Atlantic City market. Chinese government officials and executives of state-owned companies used to be a mainstay of Macau’s lucrative VIP gambling market, but that’s changed since the central government’s crackdown on corruption. Gaming revenues are still growing at an explosive rate and are expected to increase 16 percent this year to a world-leading US$44 billion. But VIPs are a much smaller part of the mix than they used to be, down from more than 70 percent historically to just under 65 percent this year, their lowest level since 2006. Not that the VIP segment is going away; rather, the high rollers are now more likely to be private businessmen rather than government officials and politically connected tycoons. Ohio’s newest racino, being developed in Cincinnati, Ohio by Pinnacle Entertainment for a May 2014 opening pending regulatory approval, has been dubbed the Belterra Park Gaming & Entertainment Center. The center is currently under redevelopment at the 122-acre site of the existing 88-year-old River Downs racetrack, including a new grandstand, paddock, jockey’s quarters and 17 new barns. Pinnacle is expected to invest more than $300 million in the project. The new casino

is expected to be complementary to the existing Belterra Casino Resort in nearby Florence, Indiana. It will have 1,600 video lottery terminals, dining, and a VIP lounge. It will have about 700 employees. Caesars Entertainment has sold the Claridge hotel tower, one of the last structures from “old” Atlantic City that was used as a casino hotel, and currently a part of the Bally’s Atlantic City property. TJM Properties, Inc., a Clearwater, Florida hotel operator, announced the purchase of the 500-room Claridge Hotel tower last month. Terms of the sale were not disclosed. The company, however, says it has no interest in operating the property as a casino, according to reports, and plans an extensive renovation of the tower. Casino MonteLago at the resort community of Lake Las Vegas in Henderson, Nevada, has closed due to lease issues with the property owners. According to property management company Kam Sang Co., the tenant has not upheld certain “contractual obligations.” The adjoining Hilton Lake Las Vegas, formerly a Ritz-Carlton, remains open. Both properties were sold in November 2012 by previous owner Village Hospitality to Newage Lake Las Vegas. The number of Singapore nationals and legal residents banned from the city-state’s two casinos has reached a high of 175,680, according to a report in the Straits Times, which says the total has grown four times since figures were first made public in 2011. Rules adopted four years ago allow residents to self-exclude and family members to apply to have relatives excluded. The National Council on Problem Gambling shows 130,556 people under selfexclusion orders as of September, of which about 90 percent are non-Singaporean residents or workers. The Pennsylvania state Senate has passed a bill to allow bar owners to offer daily drawings and raffles, and sell pulltabs, splitting revenue with the state. The Local Small Games of Chance Act would allow 4,500 bars and taverns to seek licenses for the games, with annual tax revenue to the state projected at $62 million to $156 million if 2,000 bar owners get licenses. The state House of Representatives was slated to vote on the measure in mid-November, and Governor Tom Corbett is expected to sign the bill into law.

CALENDAR December 9-12: The 40th Annual Symposium on Racing & Gaming, La Paloma Resort, Tucson, Arizona. Produced by the University of Arizona’s Race Track Industry Program. For more information, visit ua-rtip.org/symposium_racing_gaming.

March 19-20: Caribbean Gaming Show 2014, San Juan de Puerto Rico Convention Center. Produced by the CGS Group. For more information, visit caribbeangamingshow.com.

February 4-6: ICE 2014, ExCeL Center, London. Produced by Clarion Gaming. For more information, visit icetotallygaming.com.

March 19-21: iGaming North America 2014, Planet Hollywood Resort & Casino, Las Vegas. Produced by the Innovation Group, BolaVerde Media, Lewis and Roca LLP and eGamingBrokerage.com. For more information, visit igamingnorthamerica.com.

February 24-26: World Game Protection Conference, M Resort, Las Vegas. Produced by World Game Protection. For more information, visit www.worldgameprotection.com.

April 23-24: Andean Gaming and Entertainment Trade Show, Corferias International Business and Exhibition Center, Bogotá, Colombia. Produced by FADJA. For more informaiton, visit fadja.com.

Said It”

“If we were any other business they would stand on their head and spit wooden nickels to get billions of dollars invested. But if you are in the gaming business there is sort of a crummy presumption that you might be unsavory, and that burns me up, to tell you the truth.” —Steve Wynn, criticizing what he considers the impossibly high standards of the Massachusetts Gaming Commission for potential developers

“This is a nuanced area, this is a complicated area. How do you weigh a company’s behavior in other jurisdictions if they’re complying with laws that are woefully less rigorous than your own? Does that matter? It’s a legitimate question.” —Stephen Crosby, chairman of the Massachusetts Gaming Commission, commenting on whether U.S. casino operators should be penalized for how they operate in foreign jurisdictions

“I love the energy of Downtown. I felt Downtown was about to explode.” —Derek Stevens, entrepreneur and owner of the D Las Vegas and Golden Gate casinos in Downtown Las Vegas

“There are times I’ll log in and there is literally no action.” —Nevada resident Ed Miller, commenting to the Las Vegas Review-Journal that Nevada’s nascent online poker program needs more people to form an effective player pool

“New Jersey is leading the charge for full-on games. That leads us to conclude that the best solution for Nevada to exert its rightful leadership as a regulatory jurisdiction—that it needs to have a full complement of games and be able to compact with other states to increase liquidity pools and increase overall visitation to all of the sites.” —Jim Murren, MGM Resorts International chairman and CEO, during a media conference

“We’re only six months into poker. For now, we want to prove out poker first. Nevada is poker only. That was the legislative intent from the beginning and the board has no plans to do anything otherwise.” —A.G. Burnett, Nevada Gaming Control Board chairman, to the Las Vegas Review-Journal on whether Nevada should follow Delaware and New Jersey in offering other casino games online

DECEMBER 2013 www.ggbmagazine.com

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AMERICAN GAMING ASSOCIATION

IF WE BRAND IT,

Perceptions From Reality

THEY WILL

Using the good news to promote our industry By Geoff Freeman, President & CEO, American Gaming Association

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here’s no way to sugarcoat it: Some people view our industry as a necessary evil rather than a mainstream entertainment business. You and I know that’s not reality. And many of you probably think that we’ve already won this argument—that we’ve proven how the gaming industry is an economic engine for our country and a strong partner for our communities. After all, casinos have expanded into 38 states, accounting for hundreds of thousands of jobs and opportunities for local businesses. We’ve indeed made great progress in this area. Thanks to the hard-working men and women of our industry, the perception of gaming has shifted a great deal from where it was in the mid ’90s. Since then, more communities have experienced gaming for themselves, and more people recognize its enormous contributions. But local leaders often view us merely as a source of revenue instead of a partner and catalyst for growth. At the AGA, we’re looking at everything we do through a lens of growth, and growth can’t happen unless policymakers recognize our value. In the year ahead, you’ll see the AGA lead as an aggressive and unabashed champion of our industry. We’ll leave no stone unturned in telling the story of our value to communities across the country and the impact of gaming on the broader national economy. The opening salvo in our efforts comes this month. In a new video developed by the American Gaming Association, we’re showcasing the positive effect of our industry on one community—Kansas City. The video tells the story of how the industry has added tourism, created jobs for a diverse workforce, helped revitalize the community and partnered with local charitable organizations. We know that in gaming communities, our industry has (rightly) earned the reputation as a valuable community partner, and this video shows casino companies contribut-

Global Gaming Business DECEMBER 2013

ing in ways that improve the lives of citizens throughout the region. The story is told through the eyes of local leaders and those who have seen these contributions firsthand. Whether they’re suppliers, government officials or employees, these are the allies we need to leverage to tell the tremendous story of our industry. There are countless stories just like the one in Kansas City in gaming communities across the country, which is why this is just the start of our efforts. We will aggressively work to shape perceptions of the industry—releasing new research that positions the industry as a powerful economic engine and a catalyst for job creation, a champion of the customer and our employees and an outspoken advocate for responsible gaming. Additionally, we’ll highlight another area our companies have long been investing in—corporate social responsibility. Through partnerships with local charitable organizations, giving and volunteering, diversity initiatives and environmental sustainability commitments, our industry is contributing far more than economic benefits. It’s a story that must be told. Lastly, as the video featuring Kansas City shows, we’ll build a stable of advocates across the country who have experienced our business for themselves and know our dedication to first-class service and entertainment, quality jobs and community partnership. When people view the industry as a community partner and an economic engine, we can clear a pathway for more favorable policies at the federal, state and local levels that encourage innovation and facilitate growth. In the coming year, it will be a major focus of mine—and a job for all of us—to tell more of these stories. To watch our new video, visit the AGA website at AmericanGaming.org at or the AGA YouTube channel. I hope that you enjoy it and, most importantly, share it—letting the decisionmakers in your area know that there’s more where this came from.

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FANTINI’S FINANCE by FRANK FANTINI

Floating in Macau Ownership structure of public companies can make stock more valuable.

acquarie analyst Gary Pinge published a recent note in which he said that low float among Macau casino stocks will push them higher than their earnings might otherwise justify. Float is the number of shares freely available to be bought or sold, normally meaning shares not owned by insiders, or restricted from trading. The idea is that in stocks, like anything else, scarcity drives up prices, especially if people are bullish about a company. Thus, he contends, Macau stocks are up not just because of the enormous growth in gaming revenues, and because of optimism about new capacity as every operator opens a mega-resort in Macau’s Cotai district, but also because there are lots of investors pursuing relatively few shares. There are two reasons for low float in Macau stocks: 1. The pure Hong Kong companies are the creatures of their founding entrepreneurs who continue to hold most of the stock. 2. The Hong Kong-listed subsidiaries of American companies are the creatures of their American parents to whom they pass along most of their profits through dividends. The result is dominating ownership for all six concession holders as Pinge calculated in this table of float as a percentage of all shares: MGM China Wynn Macau Melco Crown Sands China SJM Galaxy Las Vegas Sands Wynn Resorts

12.1% 12.6 16.4 19.3 22.4 23.9 30.1 46.5

Average

23.6%

Note the dramatic difference between the American parents and their Hong Kong-listed subsidiaries. Las Vegas Sands’ float is 50 percent higher than Sands China. Wynn Resorts is more than three-

and-a-half times that of Wynn Macau. And, all three subsidiaries of American parents have the lowest percentage of float. The floats of American parents Las Vegas Sands and Wynn Resorts also are low by normal standards, accounted for by the fact that their founders are still in charge. LVS CEO Sheldon Adelson, for example, owns just over half his company’s shares. Pinge, who has been something of a perma bear on Macau, has become more positive recently, which is almost forced by the continued doubledigit, and accelerating, growth in gaming revenues. And then comes the flood of mega-resort openings that start with LVS’ Parisian in 2015 and continues through 2018 when Galaxy follows its 1,500-room Galaxy II expansion with the mammoth Galaxy III that might add 6,000 rooms. All together, the six concessionaires intend to increase the number of rooms in the Cotai section of Macau alone from 24,000 to 36,000, which could go to 42,000 if Galaxy III comes along. Plus 10,000 hotel rooms will rise in adjacent Hengqin Island. More important, the casinos are asking for 3,200 more gaming tables. Pinge thinks the government might only allow another 1,700, plus 350 for the Fisherman Wharf project in the Peninsula section of Macau. That new capacity, and the seemingly endless market in China, has some observers estimating that Macau gaming revenues will grow from around $45 billion this year to $95 billion in 2018. By comparison, the Las Vegas Strip did $6.2 billion last year. However, Pinge, still not quite a bull, asks how much Macau has penetrated China. The answer, he says, is that nobody knows. That answer could come as the new mega-resorts open. And if growth begins to wane, then all that new capacity will dilute the market and deflate stock prices, Pinge cautions. However, until that dilution comes, there is a tremendous amount of growth that can drive up the prices of so relatively few available shares of stock.

Global Gaming Business DECEMBER 2013

LV STRONG As we head toward the end of 2013, it has been interesting to watch Las Vegas finally achieve recovery this year. The LV recovery has been long in coming, but it is clearly here now. Housing prices have returned close to their peak, helping fuel the recovery in the locals market, a boon to Boyd Gaming and Station Casinos. Asian high-end play continues to grow, a boon to Wynn, and to a lesser extent MGM Resorts and Las Vegas Sands. It’s no coincidence that those three companies also happen to operate Macau casinos. Their Macau operations, in addition to being hugely profitable in themselves, have the happy byproduct of being player development centers for Las Vegas. Gamblers can be jetted into Las Vegas and the companies happily pay just 6.75 percent on their win vs. around 40 percent in Macau. The Las Vegas convention business is rebounding and is expected to be genuinely strong next year. That, of course, not only boosts visitation, but also average daily room rate, a key statistic for the resort business model of LVS and MGM. It should be noted that higher hotel room rates can be very profitable. Every additional dollar in rate falls almost 100 percent to the bottom line. Finally, food and beverage is a significantly more important part of the revenue mix for today’s Las Vegas mega-resorts as gigantic nightclubs sop up huge amounts of money from excessively spending patrons. If these trends continue, the biggest beneficiary will be MGM, which has the greatest part of the company focused on the Las Vegas Strip. But it also will be a nice plus for LVS, WYNN, Boyd and Caesars. 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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Offshore or Onshore? Taiwan debates gaming policy The Matsu Islands have already approved gaming, and Kinmen Islands are considering it.

or the past month, those who follow Taiwan gaming have all been trying to figure out one question: Is Taiwan shifting its policy toward main-island gaming? For the full story, one needs to first examine comments made by a Chinese official in the Taiwan Affairs Office in Beijing. On February 27, the spokeswoman of the Taiwan Affairs Office of the PRC’s State Council Fan Liqing was asked to comment on Matsu’s pursuit of establishing a special gambling zone to boost tourism. In response, Fan said China has clear restrictions against gambling, and that the rules regarding cross-strait tourism exchange also state that travel agencies are not allowed to make arrangements for (Chinese) tourists to participate in any gambling activities. People who follow Taiwan gaming and Taiwan-China politics believe that these comments were simply a restatement of the PRC’s current general official position on gambling, and that it would be a mistake to assume they reflect a State Council decision specifically to discourage PRC citizens from traveling to Matsu to gamble. The Taiwan Affairs Office has not issued any press release or other statement since the February 27 press conference reiterating or expanding on Fan’s response. Fan’s comments were reported by the Taiwan press, but they did not cause much debate or attract much attention among those who follow gaming developments in Taiwan. Her comments also did not appear to impact the Taiwan government’s efforts to pass the gaming law or Matsu’s pursuit of casino gaming. Fan’s comments did not matter much until October 7. On that day, Taiwan Minister of Transportation and Communications (MOTC) Yeh Kuang-shi was asked by a Matsu legislator about the government’s plan to support Matsu’s effort to upgrade its airport. Yeh said the ideal solution

Global Gaming Business DECEMBER 2013

By Anita Chen

The Matsu Islands were the first line of defense for Taiwan during the Cold War.

would be to require investors to commit to paying for the upgrade of the airport as part of Matsu’s casino license bid. However, since mainland China has indicated it will not allow Chinese citizens to visit Matsu to gamble, it may not be practical to accomplish the airport upgrade via casino establishment. Therefore, in his personal opinion, Yeh said, an alternative solution would be to allow gaming in a special economic zone near the Taoyuan International Airport named the “Taoyuan Aerotropolis” and allocate part of the gaming revenue to finance the airport upgrade in Matsu. Yeh further noted that he believed this would be a faster and more feasible way to help Matsu upgrade its airport to the 4C level, and would generate more revenue than a casino in Matsu. If the legislature supports such an approach, his ministry would follow up to expand on this idea. Yeh’s comments immediately led to questions whether the Taiwan government has taken a sudden U-turn on its gaming policy. Comments made last month by several government and industry contacts in Taiwan may yield a more complete understanding of the background and implications of Yeh’s comments.

Taiwan’s Offshore Gaming Policy Under current Taiwan law, casino integrated resorts (IR) are only allowed on offshore islands controlled by the Taiwan government, not on Taiwan island itself. An offshore island group interested in gaming must first have gaming approved by local residents in a referendum. Among the six offshore island groups, only Matsu has so far approved a casino referendum. For those not familiar with Matsu, it is an archipelago just off the coast of China’s Fujian Province, formerly a military stronghold for Taiwan. Since demilitarization in 1992, the island group has been struggling with a stagnant

p. 18, 19, 20 taiwan:Layout 1 11/14/13 9:30 PM Page 19

Taiwan Minister of Transportation and Communications Yeh Kuang-shi is pushing for a casino resort for the main island.

The Matsu airport in its current state (left) and an ad promoting the Taoyuan Aerotropolis project

economy, poor infrastructure and a population outflow. Matsu finally found its solution when Taiwan decided to allow gambling on the six offshore island groups if local residents approve it in a referendum. Out of desperation for more tourism business, better infrastructure (including a more modern airport and other transportation facilities) and increased job opportunities, Matsu residents approved the casino proposal in a referendum in July 2012. Since then, the Taiwan government has stepped up its effort to draft a gaming law and rules for the IR. The gaming law has been submitted to the legislature and is included in the Ma administration’s priority bill package to be reviewed by the legislature in the current session. Everyone in the industry has been expecting that if all goes well with the law, Taiwan will begin to accept casino license bids for Matsu in 2014. So why did the minister seemingly signal a major policy change at this moment?

among others, a financial center, a convention facility, a shopping and recreation center and a logistics and trading hub. Transportation Minister Yeh has been one of the key officials promoting the Taoyuan Aerotropolis. Based on conversations with people having insights into the ministry’s decision-making process, Yeh has been concerned about the long delays and has been eager to inject new momentum to accelerate the progress of the project. Increasing voices within the KMT in favor of gambling in the Aerotropolis seem also to have contributed to Yeh’s thought process. In recent months, a few legislators from the KMT have been floating various proposals to establish a special gambling zone in the Aerotropolis, including Legislator Chen Ken-te from Taoyuan, who is also chairman of the legislature’s Transportation Committee, which oversees the Transportation Ministry’s budget and bills.

The Aerotropolis Project Needs Momentum

Although Yeh is supportive of the development of gaming, sources say he and many other senior cabinet officials have doubts whether a Matsu casino can be successful, because of the challenges in transportation and infrastructure that Matsu must overcome to prepare for casinos. In addition, only one group has so far shown serious interest in developing a casino resort in Matsu, which also raises doubts in the cabinet whether the offshore gaming policy can succeed.

The Taoyuan Aerotropolis is a large-scale urban development project surrounding Taoyuan International Airport, comprising 6,859 hectares of land. It is expected to be the largest construction project in the history of Taiwan, and was touted by the current ruling party, the KMT, as one of its major campaign promises during the most recent presidential elections in 2008 and 2012. The project has faced many delays for political reasons, and due to a “stovepipe” bureaucratic mentality among regulators. In September 2012, the cabinet approved the master plan of the Aerotropolis and announced its launch. Once the urban plan examination is completed (expected in December), land acquisition and the design and construction of infrastructure will commence. This project will be jointly developed by the cabinet and the Taoyuan County government. The Aerotropolis will include,

Cabinet’s Lack Of Confidence In Matsu Gaming

No One Expected Yeh To Make These Comments Almost no one in the ministry was aware that Yeh was going to comment on the possibility of gaming in Taoyuan in the legislature on October 7. Although this idea had been floated with senior officials in the Taoyuan County government to gauge their position on establishing gaming in the AerotropoDECEMBER 2013 www.ggbmagazine.com

p. 18, 19, 20 taiwan:Layout 1 11/14/13 9:30 PM Page 20

It is reasonable to conclude that Yeh has been mulling over the possibility of allowing gaming in the Taoyuan Aerotropolis as a means to accelerate the progress of the Aerotropolis development. He has also been quietly considering alternative ways to make gambling (other than offshore island gaming) viable in Taiwan.

lis, it doesn’t appear that anyone in the Taoyuan government expected Yeh to offer public comments on this topic.

Matsu Has Remained Uncharacteristically Quiet Another curious development is Matsu’s uncharacteristic silence. Matsu has never been shy to advocate its casino proposal. County government officials have repeatedly requested the central government to respect Matsu’s choice and offer necessary support to expedite gaming. Since October 7, however, Matsu officials have not offered any comment on Yeh’s remarks. The Matsu Daily, a county government-funded newspaper that has been quite vocal about how the central government should respect Matsu’s choice and ramp up its support for Matsu gaming, has also remained quiet on Yeh’s remarks or any other gaming-related topic. The only sensible conclusion to draw from Matsu’s silence is that it has previously been consulted by the Transportation Ministry and has been asked to remain quiet until a clear policy decision is made. It also is notable that Yeh has toned down his comments on main-island gambling since October 7 and has not further explained his comment in the legislature. He has simply tried to divert discussions to other topics when prompted. Based on the above information, it is reasonable to conclude that Yeh has been mulling over the possibility of allowing gaming in the Taoyuan Aerotropolis as a means to accelerate the progress of the Aerotropolis development. He has also been quietly considering alternative ways to make gambling (other than offshore island gaming) viable in Taiwan, and is interested in nurturing support from the legislature for an official mandate for his ministry to formally pursue gaming in the Aerotropolis. However, he may have spoken prematurely about a possibility still being studied on October 7. While it is not clear whether Yeh’s low-profile approach after October 7 is based on an instruction from the cabinet, his decision to minimize main-island gaming rhetoric is prudent. In Taiwan’s political and social atmosphere, any effort to push for legalization of main-island gaming at this moment would only offer free ammunition to anti-gaming groups and cause unnecessary delays in passage of the gaming law.

Strong Local Interest Another “million-dollar question” is whether Taoyuan wants gambling. Although gambling is currently legal only on the offshore islands, voices in support of legalized gambling on Taiwan proper have never been muted. This is especially true among proponents of the Aerotropolis, who contend that it is 20

Global Gaming Business DECEMBER 2013

KMT Taoyuan Legislator Chen Ken-te is planning to introduce a bill to allow gambling in the Taoyuan Airport Park.

not legally impossible to define the Aerotropolis as an “offshore” area in order to qualify for gambling development. The most high-profile individuals supporting gambling in the Aerotropolis are Taoyuan Mayor John Wu and KMT Taoyuan Legislator Chen Ken-te. Chen is planning to introduce a bill to allow gambling in the Taoyuan Airport Park. It is not clear what type of casino development Chen is contemplating for his hometown of Taoyuan, but he is certainly pushing in that direction aggressively. Taoyuan Mayor Wu, who comes from a political family with a strong constituent basis in Taoyuan with considerable influence in the KMT, has previously stated that Taoyuan is the best location in Taiwan to develop gambling because a large international airport is located there and security would be easier. As soon as the central government makes up its mind (to allow gaming on the main island), Wu said his government will begin planning for gaming development. The logical conclusion: senior officials in Taiwan are considering the possibility of allowing gaming near the Taoyuan International Airport, but they have not yet decided whether to revise the current offshore-islands-only policy. In coming months, the Taiwan government will focus its energy on passage of the gaming law while quietly nudging the legislature in the direction of supporting gaming on the main island. The industry clearly would welcome a policy shift that opened gaming on Taiwan island, but that shift needs to be clear and decisive. Prolonged uncertainty about onshore gaming will only leave offshore gaming in limbo. Anita Chen is the managing director of Park Strategies Taiwan Co., Ltd. She leads a team that consults with gaming industry clients on the development of Taiwan’s gaming laws, regulations and industry trends. Chen also provides strategic political analysis and business advice to clients interested in Taiwan’s gaming developments and other Taiwan foreign investment topics. She can be reached at achen@parkstrategies.com.

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#10-4-14 [Trending issues in the gaming industry ]

he shorthand social media designation of this year’s “10 Trends for 2014” is very appropriate since the annual preview of issues to consider during the upcoming year is very tied to the online space. Whether it is the burgeoning social media space, the conversion of online players to land-based casinos, or the role of tribal gaming in internet wagering, the next year will be full of online issues that are important to the gaming industry. The changes in the gaming industry are clearly accelerating, and it can be disconcerting. But if you know what’s coming and how to prepare for it, you can capitalize on its impact with the right business plan, corporate adjustments and even a new attitude. So here are 10 trends that you should be aware of as we enter the new year.

That’s Entertainment Showbiz on the slot floor

good gauge of the trends facing the industry every year can be seen on the slot floor, or in particular, what the focus-group-enthusiast slot suppliers are creating to please the customers in their massive industry segment. For several years, “volatility” was the buzzword in new slot machines, as program math and simple free-game bonus events were juggled to get the most out of the newly popular penny-denomination games. The low denomination allowed players to bankroll these games with the effectiveness that players reserve for high-end slots, only without the high-end price tag. But if the 2013 edition of the Global Gaming Expo proved anything, it’s that players are ready for entertainment—brands from movies and TV, skill-style shooting games, community-style entertainment bonuses—more than ever. 22

Global Gaming Business DECEMBER 2013

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The latest wave of entertainment brands eclipses even the first boom period of branded slots, the early 2000s, when slot-makers flocked to entertainment brands from game shows (Jeopardy!, The Price Is Right) to situation comedies (The Addams Family, The Beverly Hillbillies) to classic cartoons (Popeye, Betty Boop). Perhaps the biggest difference now is that the advanced technology and computer power of today’s games do each of the themes justice unimagined 10 years ago. Back then, many of the entertainment slots involved simply placing a theme on top of the same basic bonus events. The reel symbols would use icons from the theme, and the characters of the show or movie would simply provide the context for a picking bonus or free-game event that was identical to the events in most slot games. What advanced technology has done is empower game designers to build bonus events around the theme. Take “Michael Jackson Wanna Be Startin’ Somethin’,” the second slot by Bally Technologies based on the music of the late King of Pop. Results on the free-spin bonus feed right into the award-winning video Jackson released for the song “Billie Jean.” Jackson’s famous dance in which sidewalk bricks light up is modified so MJ is determining multipliers for free-spin wins. (The “Pro Sound Chair” takes care of the audio in grand fashion.) Another new Bally slot this year was developed from the theme out. Game developer Jason Stage started with high-resolution footage of a recent concert by blues-rock legends ZZ Top in their home state of Texas and built a game around the live video to create the remarkable “ZZ Top Live from Texas” slot. These joined other Bally entertainment-based slots like “The Magic of David Copperfield” and “Titanic”—plus a new take on the musical film Grease—as games that build features around the core entertainment theme, placing the manufacturer in the thick of the competition for this newly hot slot genre. The “newly hot” status of the entertainment-based slot is confirmed this year by a company never traditionally known for high-profile entertainment brands, Aristocrat Technologies. That company’s new design whiz, former IGT legend Joe Kaminkow, put his familiar stamp on entertainment licenses Aristocrat had secured, resulting in entries like “Batman,” based on the classic 1960s TV series. The Batman game, which shared the G2E stage with the famous Batmobile from the series, is presented on a new game format Kaminkow designed that is not unlike the “Center Stage” format he had created at IGT, but the bonus rounds are wrapped around the most memorable characters and scenes from the campy ’60s Batman series. Kaminkow’s entries—which also included takes on the 1980s film Flashdance and the 1978 film Superman: The Movie—were accompanied by a masterpiece created by Ted Hase, developer of Aristocrat’s previous branded hit “Tarzan.” This time, Hase wrapped the sights and sounds of The Walking

Dead, the hit AMC series about zombies invading a post-apocalyptic world, into a new game on the high-definition “Vervehd” cabinet. Of course, International Game Technology—the slot manufacturer that first produced entertainment-based slots—is in the thick of the new entertainment trend as well. In 2014, players will see the amazing “James Cameron’s Avatar” slot machine. At an event during G2E week, the producer of the 2009 blockbuster Avatar revealed that it took four years to release a slot based on the movie simply because both partners were waiting for the technology to catch up to the task. It did. The Avatar slot machine wowed attendees at G2E with its 3D effects and recreation of the movie, which itself was popular due to its merger of 3D animation and live action. It joined “Back to the Future,” “Bridesmaids” and “Jurassic Park” in a collection of movie-themed IGT games that again prove players want entertainment. The latter game, a community-style offering on IGT’s Center Stage platform, has players selecting paths out of the Jurassic Park jungle to avoid the gargantuan roaming dinosaurs, in a wonderful reproduction of one of the film’s climactic scenes. Movies and TV are also mainstays in the new games to be released in 2014 by WMS Gaming. The “Iron Man” game does a masterful job of weaving action from the film into the bonus rounds, and “Ferris Beuller’s Day Off” recalls the funniest scenes from that 1980s hit film. On the TV side, “I Love Lucy,” the first WMS take on the classic sitcom, uses mountains of series clips to inject entertainment into each bonus round. The fact that there will be so many entertainment brands coming to the slot floor in 2014 does not mean the entertainment trend is restricted to licensed brands. Games like Konami’s “Gigantic Wheel of Winning” and its “Titan 360” format prove that. Titan 360, a gigantic bonus apparatus surrounded by play stations, looks more like an amusement ride than a slot machine. Elsewhere, “Sinbad” from Aruze and “Zombie Outbreak” from Multimedia Games prove that brands are not needed to inject entertainment into the slot experience. Sinbad plays like a game board in its bonuses, and Zombie Outbreak plays like a first-person shooter video game in its sequence requiring the player to kill zombies before they overtake the screen. Similarly, GTECH will release its own masterpiece of proprietary entertainment in 2014 with “Sphinx 3D,” with a 3D bonus sequence that engulfs the player in the game. GTECH officials say the bonus rounds were purposely made less frequent so payers can sit and experience them for a long time. Skill games are another new addition to entertainment-style slots. “Are You Smarter Than a Fifth Grader?” from American Gaming Systems tests the player’s knowledge with trivia questions. IGT’s “Centipede” features a bonus that re-creates the arcade game Centipede with complete accuracy, right down to the use of a mounted joystick. Games like these, of course, are designed attract the new generation of gamblers now in their 20s and 30s. This demographic, largely untapped by slot-makers because it is comprised of people who generally don’t go for the classic slot experience, is beginning to change how slots look. But that’s a trend for another article. —Frank Legato DECEMBER 2013 www.ggbmagazine.com

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Tarnishing or Polishing?

Image is everything and gaming has a problem.

f you’ve been in the gaming industry for any amount of time, you begin to resent the constant barrage of criticism that is brought to bear on the industry from people who know no better. It’s now been decades since gaming shed its association with organized crime and established strict regulatory systems that keep it clean. But Hollywood continues to pump out movies and television programs that portray casinos as mob-infested. But that’s only half the problem. The supposed “ills” of gaming go far beyond any criminal connections, say gaming opponents. Fueled by bogus studies by disreputable academics about how the industry supposedly gets a majority of its revenue from a small percentage of addicted gamblers, or how crime soars once casinos are introduced into a community, or why bankruptcy is part and parcel for customers of casinos, these “facts” are quickly absorbed by the mainstream media and disseminated to readers/viewers/listeners unaware of the false premise of such information. Thankfully, much of this information has been discredited by both official government data and peer-reviewed studies by credible academics. But it seems every time a gaming panel is established, these “facts” have to be defeated all over again. This has recently happened in Ohio and Massachusetts. What is more troubling, however, is that the industry is sometimes its own worst enemy by not policing its own image. In Massachusetts last month, Caesars Entertainment was forced by its partners to withdraw its bid to get a license to operate a casino in Boston because of a negative report from the state’s gaming commission (compiled by a questionable outside consultant). While much of the report focused on Caesars’ woeful financial shape—not that it matters in Massachusetts because Caesars was going to own less than 5 percent of the project— other criticisms of Caesars in the report were either settled disputes, a big reach or not relevant to Massachusetts. Another hurdle the gaming industry has to overcome is the spotty regulatory reputation in Macau, where Chinese triads once reigned supreme. Now, Macau says those days are gone, and the U.S. companies that operate there contend they only deal with licensed junket reps. But continued reporting by reputable news organizations has uncovered ongoing ties between some VIP operators and organized crime in China. So which is it? Asians say critics are being short-sighted, that these things take time to accomplish—and it’s also a cultural difference about how to approach regulation—but U.S. regulators insist that any company that operates there needs to abide by a certain assurance that they are clean operations. U.S. companies active in Macau insist they only deal with licensed, reputable VIP operators, vetted by their compliance departments. Again, a difference in perspective, but one that taints the industry just by association. Another Caesars problem is charges about money laundering at the flagship Caesars Palace. Caesars is far from the first company to face such charges. Las 24

Global Gaming Business DECEMBER 2013

Caesars Entertainment has been the focus of “bad press” lately.

Vegas Sands paid more than $45 million to satisfy similar charges just months ago. LVS claimed that its compliance structure was not robust enough, and that it has now established one that will prevent that from happening in the future. While casinos aren’t the only businesses that have had these kinds of problems, because it is casinos, the fallout—and publicity—is more serious. All of the above incidents taint what we know is a reputable industry ready to prove that we’re clean and above any questionable activity. Image is everything, and gaming must be ready to go above and beyond what any other business must do. If casino companies want to be treated like any other business, there must be no lingering doubts about whether or not we’re doing the right things. —Roger Gros

Socially Acceptable The growth of social gaming

alk about planning ahead. In April 2012, two months before the new Maryland Live! Casino near Baltimore opened to the public, the property launched a virtual gaming site that allowed people to play non-cash online games. Smart move. Myliveonlinecasino.com enabled the casino to enroll players in its loyalty program long before they ever set foot inside the property. It familiarized customers with the brand and allowed the operator to broadcast the wonders of a $500 million casino complex plunked down at a suburban shopping mall. Developed by Aristocrat and available through its customizable nLive

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Diversifying the Economy system, the website was the first of its kind: a play-for-fun solution fully integrated with a casino’s management system. And it continues to pay off for Maryland Live! Player rewards are based on games played online as well as on-property; as of April, casino officials reported that 12 percent of its online player base eventually came to the casino and played for real money, and that moreover, those players visited 40 percent more often, spent 20 percent more per visit and stayed 10 percent longer than the average patron. Will these sites easily transition to online cash wagers once they’re available beyond Nevada? Delaware hopes so. In August, the First State’s three casinos launched web portals for play-money slots, poker, blackjack and roulette. The Facebook-linked game platform DoubleDown Casino, operated by IGT, began testing real-cash online gambling in October, prior to going live in November. For Delaware, which has lost millions in gaming revenues to casinos in Maryland and Pennsylvania, the virtual games would be a welcome, if modest shot in the arm, generating an estimated $3.75 million in the first year. New Jersey also is set to be online with real-cash wagers by year’s end; some analysts say California, Pennsylvania and New York will follow suit next year, with states like Iowa then falling in line. And technology providers are starting their engines now. Bally, which provides its iGaming platform to casinos around the country, should be well-positioned to advance to cash games as soon as state governments drop the flag. Interestingly, San Francisco-based Zynga, the online gaming giant that brought us FarmVille, has opted not to pursue online gaming in the U.S. for now. But when Caesars Interactive launched its virtual World Series of Poker games in September, CEO Mitch Garber called it “a domino… the beginning of a very large online gaming business in America,” especially if providers are allowed to do business across state lines. In a recent report, the Wall Street Journal predicted global online gambling could be a $43.3 billion market as early as 2015. Right now, gaming enthusiasts in most of the U.S. are waiting to place their bets. “With social games, players begin to put regular time aside at home for game play and they become more comfortable with the ins and outs of an online gaming experience,” says Ryan Leeds, vice president of strategy for Masterminds, an advertising agency that specializes in social media. “Both of these things will ease the transition to real online wagering. “Social free-to-play casino games can definitely be a gateway for real online wagering,” says Leeds, and if the casinos are really lucky, it will even get some of those couch-bound players out of the house and turn them into actual visitors. —Marjorie Preston

Global Gaming Business DECEMBER 2013

E-Commerce and collaboration in Indian Country

ne of the hot trends ahead in 2014 across Indian Country is collaboration in exercising tribal sovereignty through tribal government e-commerce initiatives. Historically, some tribes have viewed tribal sovereignty as a resource to be shared, a public good. The trend today is to view tribal sovereignty as an action, a verb; tribal governments are coming together in the belief that tribal sovereignty only becomes real in the act thereof. The most visible example of collaboration for 2014 will be several groups of tribal governments exercising sovereignty in the wide-open field of tribal e-commerce. There are two critical drivers of the tribal e-commerce movement: 1) expanded economic development opportunities both across Indian Country and by tribes with gaming; and 2) extension of the concept and practice of tribal governments exporting goods and services to non-residents. The first critical outcome of tribal e-commerce is the ability of tribal governments to expand beyond land-based gaming. Research shows that tribal government gaming’s social and economic gains in the 1980s-’90s have plateaued in the 2000s. Additionally, the economic challenges of the past five years have left many tribes with large debt service wherein their gaming revenues are directed at paying down debt rather than toward critical tribal government programs and services. Economists found that by 2010 nearly 93 percent of American Indians lived on reservations that were impacted by gaming, whether through a gaming facility, machine lease rights or revenue sharing. In spite of this nearly universal access to tribal gaming revenues, in 2010 American Indian per capita income remained at 45 percent of the U.S. average, American Indian unemployment is more than double the U.S. rate and college attainment among American Indians is less than one third the U.S. average. The obvious challenge of land-based economic development of any kind is that it depends on attracting guests to reservation-based properties. Tribes made significant capital investments in their gaming facilities and added other impressive amenities in order to attract gamers and tourists alike. Counterintuitively, in the jargon of economics, attracting gaming action and tourism from off-reservation increases exports. In other words, gambling or entertainment services are “exported” to off-reservation consumers, since the casino guests and tourists themselves actually come from the surrounding region. E-commerce expands this tradition of tribal exporting by providing access to a much larger pool of consumers through marketing products and services to non-residents of tribal reservations via the internet. Tribal governments are coming together to invest in the hardware, software, marketing and technical skills required to offer a range of online products and services. A number of well-organized inter-tribal groups are launching online class II gaming businesses (both bingo and poker) in 2014. Others have developed online financial services, including various forms of lending. Still others are pursuing manufacturing and warehousing with online fulfillment services. E-commerce offers tribal governments a critical lifeline wherein they can export to consumers who can visit the reservation remotely via technology, creating a level playing field for all tribal communities regardless of their geographic location. What these collaborative efforts have in common is the exercise of tribal sovereignty, acting on the truism that when it comes to tribal sovereignty, what has not been taken away remains. —Dr. Katherine Spilde, Associate Professor, School of Hospitality and Tourism Management Endowed Chair, Sycuan Institute on Tribal Gaming, San Diego State University

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iGaming: The Lottery Angle Will state lotteries compete with casinos on the internet?

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ost of the talk concerning who will be the near-term winners as internet gaming spreads across the U.S. has concentrated on experienced iGaming suppliers and operators, bricks-and-mortar casino operators and, to a lesser extent, Native American tribes. The elephant in the room during all these discussions? State and provincial lotteries. While state legislatures and the U.S. Congress were debating the legalization of casino games over the internet, operators of state lotteries began to consider whether they already had the legal authority to offer casino games online. In fact, in late 2010, the District of Columbia Lottery reached that very conclusion, passing an omnibus-spending bill containing a provision legalizing a full slate of games of chance and skill to be offered over the internet. The bill cleared the required 30-day review by the U.S. Congress, and it looked like D.C. residents were poised to become the first in the nation to legally gamble on the internet. It was not to be. In February 2012, the D.C. Council repealed the law that had authorized internet games, due to criticism that it had been attached to a spending bill and thus had not been debated. Of course, by that time, the iGaming genie was out of the bottle, thanks to the December 2011 opinion from the U.S. Department of Justice that the federal Wire Act, which had been presented as the basis for iGaming’s illegality, did not prohibit any form of internet gaming outside of sports betting. So far, the land rush for lottery-based iGaming has not happened, as state legislators have taken a very careful approach to introducing the internet—first as solely a means to sell electronic scratch-off tickets. However, in 2014, this could change, as state officials gauge the success of the first three legal iGaming programs—one of which happens to be run by a state lottery. Delaware is one of the few states to run all gambling through the lottery. The state owns the slot machines in all the casinos (although that will change soon), and refers to them as video lottery terminals. When the state legislature legalized internet games, they were simply added to the stable of games already offered by the lottery. Other states may view their lotteries as a perfect vehicle to add internet gaming quickly. Logical contenders would be West Virginia, New York and Washing28

Global Gaming Business DECEMBER 2013

ton, all of which run the games at bricks-and-mortar locations through the lottery. If Delaware generates a decent amount of revenue through iGaming—a questionable proposition, to be sure—more lotteries may follow suit. At a recent regulatory conference in Philadelphia, Georgia Lottery COO Kurt Freedland commented that the multi-state lottery organizations that already exist—the Multi-State Lottery Association, which runs Powerball; and the Mega Millions organization—already provide a vehicle for interstate poker pools, to achieve the liquidity of players needed to be profitable. Freedland also noted, though, that easy to add or not, the initiation of iGaming is subject to political realities. In Pennsylvania, for instance, there are two iGaming bills on tap—one to legalize and regulate internet gaming; the other to ban it completely. And so far, other states seem to be going the legislative route, with few claiming they can simply add casino games to their lottery offerings with no new law. Bills to authorize intrastate iGaming can be found in states including California, Texas, Florida, Illinois, Iowa, Louisiana, Maryland… even Hawaii, one of two states with no legal gambling whatsoever. Whether success in Delaware with iGaming through the lottery leads to an acceleration of lottery-based iGaming as one of 2014’s trends is something that time will tell. —Frank Legato

Power Structure

Are REITs the answer for a new casino company shape?

he year 2014 starts with an entirely new opportunity for gaming investors—the industry’s first real estate investment trust, Gaming & Leisure Properties Inc. GLPI came into being on November 1 when Penn National spun off all its real estate holdings into the new publicly traded company that intends to apply for REIT status in January. REITs have long existed in other industries, and the model has gained popularity in recent years in gaming’s sister industry, lodging. A REIT owns real estate in a trust structure. It pays no income taxes, and must pass along at least 90 percent of its profits to its shareholders through dividends. They, in turn, pay income taxes on the dividends. The REIT only is a property owner, and it leases out the properties to other companies to manage. PENN had several motives for adopting the REIT structure. Among them: • Unlock value. Stocks of regional casino companies trade at seven or eight times cash flow, while REITs commonly sell at 14 or 15 times. As one company, all of PENN’s value was trapped in that 7-8 range. Now, at least the real estate portion trades higher. • Create a new growth vehicle. GLPI can buy small casino properties and lease them back to their previous owners to operate, or sign management con-

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Penn National Gaming no longer “owns” its Hollywood casinos

tracts with other companies. • Develop an asset-light business mode for Penn National, which can pursue growth through management contracts or by acquiring new gaming licenses without having to pile up debt to finance purchases or construction. • Create income for shareholders through the dividends that REITs must pay. Initially, GLPI’s only tenant will be PENN, but over time, the new company can sign management contracts with other companies, lease back casinos to their former owners, and even buy real estate outside of gaming—say hotels or apartments or shopping centers. Whether PENN is creating a new model that will become commonplace in gaming is subject to debate. The bulls cite all of the motivations listed above, and note that gaming now will be attractive to a whole new category of investors who favor putting their money into REITs. They note that the several hundred casino properties that can be bought by a REIT make for a lot of opportunity for GLPI. And they cite the success of the asset-light model for hotel companies like Marriott and Starwood, and say PENN can be just as successful. They also point out that, as the only gaming REIT, PENN will have the field to itself, at least initially. Skeptics say that REIT investors might not like that GLPI has just one tenant initially in PENN. Further, the idea of rolling up casinos into a REIT has not been tested. And casinos, they point out, are different from hotels because of the volatility of gaming revenues and the much greater risk of legislative, regulatory and tax changes in various jurisdictions. Finally, GLPI could breed competition. Other gaming companies can spin off REITs. Other REITs can start buying casinos. Entirely new REITs can come into being to focus on gaming. So, the success of the new model will be proven over time. But, at least at the beginning, the optimists rule the day. PENN stock sold under $38 when the restructuring was announced last November. On its first day of trading after the restructuring took effect this November, the two stocks combined sold at $60. GLPI alone was over $46. — Frank Fantini, Editor and Publisher, Fantini Gaming Report

New Gamers Why attracting younger players is essential

ometimes the numbers just don’t add up. In its 2013 State of the States report, the American Gaming Association reported that in the previous 12 months, 39 percent of people aged 21-35 patronized a casino, and nine out of 10 said they planned to return. Around the same time, a poll of 3,000 adults in 16 markets in the Northeast found that just 18 percent of people 35 and under had visited a casino in the past year. The figures are contradictory, but one thing is certain: the ever-expanding gaming industry eventually will need to replace the middle-aged slot players who now pay the bills. The patron base historically has regenerated itself, but will it continue to do so? Randall Fine, managing director of the Fine Point Group in Las Vegas, gives a qualified yes. “A dozen years ago the average casino patron was 65 years old; today the average age is 65,” says Fine. “Either the 65-year-old gamblers of 12 years ago have come up with a way to stop time, or they’ve been replaced with new people.” That evolution should continue, he says, as Gen X, Gen Y and millennial consumers acquire more money and time for entertainment; the challenge for casinos is to give these nascent customers what they want—and they may not want slot machines, at least not the pulllever/reel-spin slots that dominate the gaming floors of today. Accustomed to the flash, animation and immediacy of high-tech video and computer games, these potential patrons simply won’t be satisfied with newer incarnations of the one-armed bandit. “Watching reels spin around isn’t going to get them excited. The slot industry needs to create a product that’s more like PlayStation, Grand Theft Auto, Golden Tee or Madden NFL,” says Fine. “Obviously the technology is there, but the creativity and the math models aren’t.” In recent years young adults have shown a willingness to splurge on concert tickets and pricy nightclub bottle service, but have been less inclined to migrate to the casino floor. An oft-cited example is the Cosmopolitan in Las Vegas, which has a flourishing club scene but lags in gaming revenue and has yet to turn a profit. To that, Fine says casinos should make their money where they can, including nongaming amenities like clubs, spas, shopping, dining and entertainment. DECEMBER 2013 www.ggbmagazine.com

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Unlike Cosmopolitan, says Fine, “Steve Wynn is making a ton of money on nightclubs because he hasn’t outsourced” his club and restaurant inventory. Furthermore, he adds, “I don’t know what you can do to make that 20-something nightclub patron stop at the table games, and I’m not sure you should try. Nightclubs are a very profitable business.” As long as the money is green, it may not really matter where it’s spent. But casinos in many jurisdictions don’t have the swanky nightclubs, day clubs, ultra-lounges and tropical pools that have partiers lining up in Sin City. Those casinos might want to take a cue from the Las Vegas playbook. During his brief tenure as interim president of Revel, the Atlantic City casino still struggling to attract both diehard gamblers and the new generation of players, Jeffrey Hartmann noted that young patrons “are our future. So we have to know how to reach, attract and hold onto them as the ‘New Gamers.’” —Marjorie Preston

Pay to Play Coalitions of tribes ready to offer Class II online gaming

The ‘S’ Word

Is saturation creeping into the U.S. gaming industry?

s recently as the late 1980s, there were only two legal gaming jurisdictions in the United States: Nevada and Atlantic City. Then the creep began. First, the passage of IGRA in 1988 spurred a boom in tribal gaming that continues to this day. Once small (and large) bingo halls, tribal gaming now includes some of the largest casino resorts in the world. Then, the states along the Mississippi River rediscovered the romance of the riverboat gambler (and usurious gaming tax rates), and floating casinos plied the rivers of middle America. In Mississippi, probably one of the most conservative of the Southern states, riverboats came ashore on barges, signaling a second stage that has done away completely with any cruising casinos. Failing racetracks were the next into the act, introducing slot machines whose revenues would partially subsidize the various elements of the racing industry. The justification was that higher purses would attract better horses and more competitive races that would in turn bring bettors back to the track. Didn’t work, and the slot parlors soon morphed into full casinos that now far overshadow the racetracks they were designed to save. Big cities have also gotten into the act. New Orleans and Detroit approved casinos in the 1990s, and today cities like New York, Cleveland, Baltimore, Cincinnati, St. Louis, Boston, Philadelphia, Pittsburgh and others have or will soon have large urban casinos. Will other cities have to get into the act to stay competitive? With Massachusetts about to introduce four large casinos and a slot parlor, Maryland to approve a huge casino in suburban Washington, D.C., and Florida toying with the idea of integrated resorts in its tourist areas, there remain but a few regions of the U.S. that are underserved by casinos—Texas and parts of the Southeast remain about the only casino-free areas. Revenues at existing casinos have largely stalled or declined all across the U.S. as more competition comes on. Booms in Oklahoma and Pennsylvania over the last few years are largely over. Casinos in Atlantic City, Connecticut and Delaware have been devastated by surrounding competition. Revenues at tribal casinos that were once money machines for tribes have leveled off or been in decline. And the younger generations X, Y & Z have not taken to gambling as their elders did. Whether it’s the lack of skill games that are so popular among youth or a focus on the nightclubs, there has been no crossover to the casino floor. So gaming has to figure out what saturation means, how to grow a stagnant market and what casinos will look like in the future. Is it a pretty picture or a grim vision of a bleak future? —Patrick Roberts Global Gaming Business DECEMBER 2013

bout a dozen American Indian tribes have announced plans to enter the for-pay online gambling market before the end of the year, but in the absence of federal internet legislation, progress has been slow. Because tribal governments are apparently limited by the Indian Gaming Regulatory Act (IGRA) from accepting wagers from outside reservation lands, tribes are hampered by the lack of a federal bill from generating the player liquidity to create a profitable online venture. But at least three ventures have been created, two of them seemingly attempting to test the legal prohibitions against offreservation wagers. The three tribal groups are hoping the electronic bingo games that led to a landmark 1987 U.S. Supreme Court decision and congressional legislation allowing Las Vegas-style casinos on American Indian reservations will enable them to enter the online gambling market. The groups anticipate launching websites offering Class II, bingo-style gambling permitted under IGRA. The sites would be regulated by tribal commissions with oversight from the National Indian Gaming Commission (NIGC), the federal regulatory oversight agency for some 425 tribal government casinos in 28 states. With an increasing number of states moving to legalize internet wagering, many tribal governments see Class II gambling as an option to confront emerging online

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competition to their land-based casinos. About 40 tribes are operating free-play or social gambling websites. Desert Rose Bingo, a partnership of Alturas Rancheria in Northern California and Great Luck LLC, is leading the way. The partnership launched a free-play, limited-access website September 29 with the goal of taking real-money wagers from off the reservation before year’s end. The Tribal Internet Gaming Alliance (TIGA), a consortium of three Wisconsin tribes, also plans to launch its website before year’s end. Tribes from the states of Washington, Wisconsin and Michigan have all expressed an interest in TIGA, according to Jeffrey Nelson, an attorney for the group. The Lac du Flambeau Band of Lake Superior Chippewa Indians in October became the first tribe to ratify an internet treaty it hopes will unite other Midwest tribes into an online alliance. “Until state or federal e-gaming laws change, wagers will be taken only from people who are physically present within the member tribes’ collective jurisdictions,” Nelson says. The Inter-Tribal Online Gaming Alliance (ITOGA), a group of seven tribes in California, Oklahoma and Michigan, intends to operate a bingo website that, like TIGA, could be expanded to offer poker. Desert Rose and ITOGA are looking to stretch the legal boundaries of IGRA, which generally restrict tribal gambling to Indian lands, by placing servers on the reservation and using a “proxy” process to accept off-reservation wagers. Although IGRA and the NIGC generally permit the use of technological aids in offering Class II gambling such as bingo and poker, federal courts are divided on whether the wager occurs at the internet server or where the gambler is located. Meanwhile, California tribes are pressing for intrastate internet poker legislation, hoping to capture the state’s potentially lucrative market of 38 million residents. —Dave Palermo

Global Gaming Business DECEMBER 2013

Bringing It All Home

Will online gamblers become casino gamblers?

he advent of legal online gaming in the U.S. was fought for years by the land-based casino industry. Many casino executives still are opposed to the new way to bet because they believe that online gambling will simply give their customers another reason to stay home. Many casino companies concluded, after looking at the numbers, that online gaming could provide substantial revenue that would be going to someone, so why shouldn’t it be

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them? The data about online gaming’s impact on land-based casinos is far from complete, but the revenue numbers are not, so casino companies couldn’t ignore that fact. Sheldon Adelson of Las Vegas Sands and Len Ainsworth, the founder of Aristocrat Technologies and Ainsworth Technologies, agree that online gaming is a terrible idea, not only because it makes it more difficult to bring someone to a casino, but also because they believe it’s bad for society. The notion of someone gambling in their underwear isn’t a pretty sight, but it is, undoubtedly, the reality. So the argument goes from stopping online gaming to determining how land-based casinos can use it to bring more players to the casinos. So far, we only have three examples of states with casinos and online wagering. Nevada has introduced only online poker, already just a small slice of the land-based casinos’ business. Delaware and New Jersey have just introduced full online gaming, but there just isn’t enough information about how their casinos have been impacted one way or another. But let’s examine how the casinos have reacted. In Delaware, online gaming is run by the state lottery, so the casinos there have little input into how it is offered. In New Jersey, however, the Atlantic City casinos hold the licenses and have hired online gaming operators as partners. The level of cooperation between the two varies widely. Some casinos are simply handing the keys over to the online operators

for a pile of money, but keeping their customer data separate, fearful that their existing players will opt to stay home. And let’s remember that the AC casinos are only getting a small percentage of the online gaming revenue, in most cases around 30 percent. So there is little incentive for them to encourage their players to participate online instead of coming to the casino. Other casinos are incorporating their current customers with online gaming, offering web players similar benefits as they would earn at the casino, but redeemable only at the casino. Of course, the idea is to get the online players to the casino. Let’s not forget that the connection between online gaming and the landbased casinos hasn’t really been duplicated in other parts of the world. In Europe, online gaming companies were separate entities, and by the time that the land-based casinos understood that they were losing business to the online casinos, it was too late. The online casinos had established brands, customer service, and popular games that the land-based casinos simply could not match when they finally got in the game, much too late. But in the U.S., it’s logical to assume that the pattern set early on—landbased casinos operating online casinos—will continue. So the lessons learned in Nevada, Delaware and New Jersey will go a long way toward determining the impact of online gaming on land-based casinos. —Patrick Roberts

DECEMBER 2013 www.ggbmagazine.com

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GLOBAL GAMING WOMEN

Dos & Don’ts Female executives play by an entirely different set of rules

o many column inches have already been taken up with the issues surrounding more obvious male/female inequalities in the workplace. We have divergent views in the U.K. about whether this can be fixed by “quota” qualification, and my experience is that with a number of senior women executives balking at becoming a token diversity package (as opposed to merit-based), the solution remains elusive. My own experience has extended from being inhouse counsel at Ladbrokes to partner in a city law firm, and more recently as a non-executive director at Playtech PLC. Women in the workplace can be their own

“

By Hilary Stewart-Jones

the embarrassment. If there is no formal networking and mentoring system in your firm, then create one. It is not rocket science. Spend the time and effort on your review periods with a proper dossier on all your value adds. Too many people regard the review to be an intrusion from “real” work. It’s as much a sales pitch for you as a tool for management. • Regard your CV as a work in progress. Do not dig it out at the time you feel so disgruntled you want to leave. When you analyze what you have been doing as an outsider would see it, it can stop you getting stale and can be great for self-esteem. It can also get you out of the door

Women in the workplace can be their own worst enemies. Couple that with the challenge of being in the gambling industry (never shy of sexing-up a sell), and the issues magnify.

worst enemies. Couple that with the challenge of being in the gambling industry (never shy of sexingup a sell), and the issues magnify. This has nothing to do with the dreaded maternity issues, by which milestone we will be weighed and checked, but by endless ways in which we do not navigate the workplace smartly enough. I do not hold myself out, by any stretch of the imagination, as someone who has done this well. However, I would say what we have is what we must work with, and what we do not have we must (if we have any scope to do so) do everything in our power to change. What I would therefore suggest are tactics to cope with the system that currently exists in most firms, and suggestions of changes to policy thinking. Of the former I would suggest: • A good job done by a woman does not necessarily get rewarded, or noticed, even though morally it should. If you don’t want to join the smug self-promoters, then get a mentor who will help you overcome 34

Global Gaming Business DECEMBER 2013

”

quicker if matters really get unbearable! • Raise your profile outside the organization you work for—publish articles, speak at conferences. You fly the flag of your employers (which always helps), but the networking can again provide a safety net should you need a job move to progress your career. • Do not endlessly play the gender card. I am not suggesting we put up with everything thrown at us, but as we all know a man is “strong” and a woman “strident,” and I have seen too many (male) eyes roll in meetings when the gender equality issues are brought into every debate. • Don’t cry. We have all done it, and it terrifies our male colleagues. Go for a walk, rant at someone outside work, but keep it away from the workplace. Most importantly, write down what has brought you to tears. Put it away and leave it for a week to maturely reflect on what caused the issue. Try and see how management would see it should it come to a formal grievance; and it will

also have the advantage of being strong evidence because it was created contemporaneously. • Do not put management in the position of having to say, “What do you want me to do? Fire him?” Try and find solutions. Management knows that the best teams comprise men and women and that it is the best interests of the company to have that mix, so depersonalize the complaint. • Most importantly, never become sexist (and, at the very worse, an anti-female female). Help the women around you (they need it) but do not demonize any of your colleagues, male or female. Companies of (mostly) men can try to create gender-neutral environments, but there are wider societal issues in keeping women in the workplace. The above are largely self-help suggestions. Without fundamental changes, it will still result in us losing many talented women who are simply ground down by the battles they face, and these unfortunately usually come down to maternity issues. The problem is that companies have to incentivize women to stay. It is as if a maternity leave policy that is slightly more than a statutory minimum is the best they can do. Disrupted work schedules and part-time hours are difficult for the women and for the teams they work with, leading to the perfect storm—all in an environment where the pay earned largely is thrown on childcare and where there is no ability to advance a career while away from the office. In addition, and maddeningly, where their male partner may already be paid significantly more, making it doubly tempting to leave. If a woman can ride a five-year period after her first child and probably second, she is much more likely to stay. Companies need therefore to make their absent or flexible working colleague feel really valued, and that her successful career is of critical importance to them. Finally, it is not enough to hope for change. If any of us has the power to change something for the better of other women in the workplace, it is our real duty to do so. Hilary Stewart-Jones is a partner in the London office of DLA Piper, where she focuses solely on gambling-related issues.

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PAYMENT POSSIBILITIES Processing cash for online gaming can be a challenge By Marco Valerio

he overall success of legalized, U.S.-regulated iGaming will be largely measured by how much money it is shown to generate. Considering the pressure is on, much of this judgment is likely to be passed in the short term following launches in early key states. The technology may be stellar, the players may be satisfied and entertained, but the promise of jobs and revenue is what got so many parties in the legal and business space to go along with this in the first place. A lackluster early showing may demoralize at least some investors, especially if the promise of the iGaming market was ever oversold. The problem is that all too often, when discussing the projected success of online gaming in the U.S., it is presupposed that Americans who have the desire to gamble online are simply going to, legality permitting. This would be the same as saying that a new brickand-mortar casino will be patronized by all nearby residents who want to gamble, even those who have no car and no other means to reach the facility. In the case of U.S. online gaming, the car in question, the vehicle that allows the player to begin gambling at all, is the ease with which the player will be able to fund his online account. Michael Kaplan, senior vice president of business development at PayNearMe, saw this coming. “The payment processing issue in U.S. online gaming is potentially a big problem. At the risk of stating the obvious, if players cannot fund their accounts, they cannot play.” As obvious as it may seem, the short-term payment challenges that are likely to characterize U.S. iGaming’s early beginnings aren’t that clear to everyone. 36

Global Gaming Business

DECEMBER 2013

Cards, Banks And Transactions The U.S. banking industry’s relationship with online gambling remains spotty at best. “Without the top banks supporting iGaming, we cannot be successful as an industry,” says Tim Richards, manager of interactive solutions at Global Cash Access. GCA is a publicly listed company that provides the casino industry with a variety of payment solutions, including ATM services, debit and credit card cash advances, check cashing and ticket redemption kiosks. As the next logical step in their business, the company is preparing to enter the iGaming payments space. “It’s not easy to navigate,” Richards says, “and we’ve spent a lot of time understanding it. There are folks who have not done this before in the U.S. and maybe didn’t quite understand what was required. It’s something that was wholly underestimated by a lot of folks coming into the space.” In an ideal world, American gamblers would be able to fund their online accounts via either debit or credit card, the most common payment methods in practically all of today’s e-commerce. Most online users can be expected to have either type of card, and be familiar with the process of using it. In addition, funds deposited via debit card usually clear almost immediately, enabling the player to begin gambling as soon as he wishes. (By contrast, automated clearinghouse and echeck deposits take longer to clear. It would still be possible for the operator to immediately credit the player’s account in the meantime, but this is usually not optimal and leaves the operator exposed to fraud.) Unfortunately, the use of debit or credit cards to fund online gambling accounts continues to yield a high incidence of failure in states like Nevada, where online poker for real money has been unquestionably legal for over six months. Although the major card networks (Visa, MasterCard) are by now more or less on board with legalized online gambling transactions, the decision to process

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Cards are issued by banks, which also process payments, and banks have been extremely hesitant to get involved with anything even dubiously related to “unlawful gambling” since 2006, when the Unlawful Internet Gambling Enforcement Act was passed by Congress.

them doesn’t rest solely within them. Cards are issued by banks, which also process payments, and banks have been extremely hesitant to get involved with anything even dubiously related to “unlawful gambling” since 2006, when the Unlawful Internet Gambling Enforcement Act was passed by Congress. While there were some clearly delineated exceptions to the UIGEA (horse racing, for example, which is subject to its own separate transaction code), banks were left largely up to their own devices to figure out what unlawful gambling was supposed to be. The result is that most of them opted to take a rather blanket view and avoid any unnecessary exposure. Like practically every other area of commerce, online gambling is subject to its own MCC—merchant category code. Credit card companies issue these codes, which are used by the banks to decide whether they want to process those payments or not. The MCC most often associated with internet gambling is 7995, which, to most U.S. banks, has historically looked like a pentagram. It wasn’t until the Justice Department’s reinterpretation of the Wire Act in late 2011 that both the banking and the gambling industries got a better idea of what the federal government considered unlawful internet gambling. The primary takeaway from that decision was that online gambling was no longer considered as broadly illicit as it had once seemed, provided that it did not involve sports betting, that it did not cross state lines and that it obeyed local state law. In view of this, shouldn’t any pre-2011 concerns about online gambling payment processing be arcane by now? Unfortunately, the banking industry isn’t paying as much attention to the online gambling industry as we are. In his report titled “Payment Challenges for the Emerging U.S. Intra-State Poker Market,” Paul Davis of Counting House writes, “One would hope... the banks will take a more liberal view of the lawful use of their facilities. There is little financial incentive for them to do so, however, and we should never forget that the typical compliance officer in a large bank knows little of the detail of the gaming world.” This leaves the industry in an uncertain position. On the one hand, the banking community could simply change its mind about MCC 7995, and some have. This, however, would be a long, slow process to see through to complete uniformity, given how many banking establishments there are. “If you speak to the banks and the card networks,” Richards explains, “they

wholly support legalized internet gaming transactions. What they’re trying to figure out is how to fireproof themselves on the risks, and how much time and energy they are willing to invest in something that may not be substantive for them until a few more years.” The card networks have taken some of the lead in trying to elicit compliance from the banks. MasterCard has decided to begin using an entirely separate MCC for legal internet wagering—MCC 9754. Earlier this year, Visa acknowledged the challenge facing legal iGaming transactions and announced the creation of the internet Gambling Stand-In Processing (STIP) Blocking Service, a method meant to help banks filter which internet gaming payments are legitimate and which aren’t. (According to some online poker players in Nevada, however, Visa deposit success rates have remained notably low.) It is thus not altogether impossible to use cards to fund online accounts, and the process is bound to improve, but while it does, it may be worth studying and considering other account funding options.

Non-Traditional Methods “Payments are the lifeblood of a remote gaming operator,” says Phil Jackson, CEO of London-based Boxhill Technologies, which operates payment service PayCorp. “The European and Asian payment landscapes are relatively mature. The U.S. landscape in this sector remains something of a blank canvas which will inevitably foster innovation, but equally become a magnet for fraud.” ACH (automated clearing house) and electronic checks, although commonly in play, are both susceptible to the type of fraud that Jackson is referring to. They are generally reliable options, but not without their drawbacks. Because the funds cannot usually be cleared immediately, this either slows down the rate at which players can deposit or forces the operator to credit the customer’s account while waiting for funds to clear—which they never might, leaving the door open for fraud. An additional inferiority of ACH and echecks is that many Americans have seldom or never used them and are not as familiar handling them as they are with debit or credit cards. DECEMBER 2013 www.ggbmagazine.com

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Fortunately for the iGaming industry, there exist other cash-based payment lifelines. The brick-and-mortar casinos themselves, which are increasingly becoming the hosts and sponsors of new online gaming offerings, are the main providers of a very self-sufficient solution: letting online gamers fund their accounts directly at the casino cage. In Nevada this has already proved popular thanks to Ultimate Poker, which allows locals to deposit online via any Station casino. New Jersey is set to offer this option as well. John Mehffaey, a gaming consultant and player advocate based in Las Vegas, is a fan of the cage deposit method, and believes it has given Ultimate Poker a leg up on one of its competitors, WSOP.com, which has yet to allow it as a payment option. “WSOP.com is missing out without cage transactions,” Mehaffey says. “If an Ultimate Poker player has issues with their credit card or echeck, they have the cage option. WSOP.com is losing those types of players, although I do not know to what extent.” “The number of players who are having issues depositing at Ultimate Poker must be close to zero since they have cage deposits,” Mehaffey continues, “although I suppose that a player could change his mind on the way to a Station casino, or dump it into a slot machine on the way to the cage.” In this way, the cage deposit option speaks to other pressing concerns that numerous brick-and-mortar casinos still have with regards to online gaming. For one, it does bring the user into the brick-and-mortar facility— always a happy sight. It can also make the depositor feel more secure about the transaction by letting him hold the cash in hand and watch a trusted casino employee handle it. At the same time, online gambling is supposed to be about convenience, and players should not be expected to drive out to their local casino every time they feel like playing from the comfort of their own homes. The aforementioned PayNearMe takes the cage deposit idea and expands it to apply to various other participating retailers. An outlet in cooperation with PayNearMe, such as a convenience store like 7-Eleven, can thus become an agent in accepting players’ deposits and transferring them to any online site. By selecting the PayNearMe option, players are given a deposit code online—they bring this deposit code, plus the cash, to the participating outlet and complete their transaction there. The player still has to leave the house to deposit, but his choices for locations to do this are conveniently increased. In addition, all transactions are done in cash and the funds are transferred immediately.

The brick-and-mortar casinos themselves, which are increasingly becoming the hosts and sponsors of new online gaming offerings, are the main providers of a very self-sufficient solution: letting online gamers fund their accounts directly at the casino cage.

Global Gaming Business DECEMBER 2013

Future Considerations

As the U.S. online gambling environment grows and matures, so will the need for effective payment solutions. Different eligibility requirements and operational standards for payment services may apply on a state-by-state basis. Will payment processors be able to keep up with the eventual interstate player pooling? Will new, unforeseen issues arise based on the player’s deposit or withdrawal location? It’s worth keeping in mind that some federal online gaming solutions proposed in recent years have been quite specific in their treatment of payment methods. U.S. Rep. Joe Barton’s Internet Poker Freedom Act of 2013, for example, would ban the use of credit cards altogether to fund online gaming accounts, whereas both Nevada and New Jersey currently allow them, although with controls. With all the exciting developments marking the U.S. online gaming industry’s path to broader regulation, it’s easy to forget that payment processing was what brought down the U.S. online poker giants in the first place on Black Friday, partly paving the way for the resurgence of a homegrown industry. In April 2011, managers of PokerStars, Full Tilt Poker and UltimateBet/Absolute Poker were indicted for crimes largely having to do with trying to skirt banking regulations and miscoding transactions. Internet gaming lobbyist Joe Brennan Jr. would later go on to inculpate untenable payment standards in a CalvinAyre.com editorial. “U.S. poker players want their processing immediately. And for the most part, that’s what they got. It was those expectations that contributed to the Black Friday meltdown of the U.S.-facing online poker industry. Especially after the passage of the UIGEA in 2006, players responded by wanting money even faster than before.” And in their mad quest to keep up, the online poker powers had to resort to breaking the law in order to meet demand. (Or so the U.S. government alleges.) With the pressure of gaming regulation weighing heavily upon today’s iGaming operators, it is unlikely that a payment processing scandal the likes of Black Friday may happen again. That said, while the once-unclear legal environment for U.S. online gaming has certainly been clarified, deeply ingrained banking and payment policies haven’t been polished as much. Sufficient demand, spurred by high gaming activity on new U.S. sites, may motivate the payments world to take the matter more seriously. Then again, high gaming activity may not be fully realizable until the payments world begins taking the matter more seriously.

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iGaming North America

The Legality of Social Gaming Given its scope, how closely should regulators look at social gaming?

something of value. The Alabama statute, however, includes a broad definition of what “winning something of value” means. It states that something of value is defined as “any money or property, any token, object or article exchangeable for money or property or any form of credit or promise directly or indirectly contemplating transfer of money or property or of any interest therein, or involving extension of a service entertainment or a privilege of playing at a game or scheme without charge.” On social networking games, people can buy tokens or virtual currency that enables them to play the gambling games. The tokens or virtual currency cannot be redeemable for cash, but only to play the games to win either additional tokens or virtual currency or “virtual prizes.” The virtual prizes can then bound to the player’s character— i.e., they could not be sold outside the game. These items cannot be bought or sold and players have no way to redeem the items for either cash, prizes or other thing of value. The virtual prizes will have real value if they can be sold in any fashion, such as through an exchange or an auction site. For this model to avoid legal issues, the virtual prizes cannot acquire independent market value. Therefore, the question is whether the awarding of tokens or virtual currency, which can be used to win more tokens or virtual prizes based upon the outcome of these games, constitutes a prize. Two issues arise when considering whether an item has value. The first is whether the item itself has a market value. While a prize does not have to be money, courts generally require it have a reasonably determined value. Therefore, a strong argument can be made that a difference exists

Global Gaming Business DECEMBER 2013

‘‘

between an honor and a prize, i.e., merely being crowned a champion or receiving an acknowledgement in a virtual item versus receiving goods or services that have a defined market value. The second is whether the item, despite having no market value, can be exchanged for cash or an item of value. The virtual prizes have real value if they can be sold. If the virtual items have no independent value and cannot be sold or traded, they should avoid the prize element under most state laws. This prevents a monetary value from being given to the virtual items. A few states, like Alabama noted above, have defined the prize element to include an extension of a service as something of value. In states that find something of value to include extended play, the awarding of additional tokens as winnings may be deemed a gambling activity because players risk something of value (real-world money entry) on the outcome of a game of chance on the understanding the users will receive something else of value (more tokens and, therefore, extended play). Many sites attempt to avoid this issue by always awarding additional tokens when a player exhausts his or her supply. The only difference is the level of game that the person qualifies to play— e.g., a lower-limit poker game. Without the ability of a person to consistently obtain free chips to continue play, a greater risk exists that the winning of tokens could be considered an “extension of a service entertainment” under the state laws that have such a prohibition.

The virtual prizes will have real value if they can be sold in any fashion, such as through an exchange or an auction site. For this model to avoid legal issues, the virtual prizes cannot acquire independent market value.

‘‘

rom a legal perspective, social gaming is not well-defined. Many want to lump in several types of offerings that have much different legal considerations. These include sweepstakes-based subscription sites, which often share a common structure. A person could purchase a monthly subscription, typically $19.95, which entitles him to multiple benefits including magazines, blogs and other benefits. The subscription, however, also includes the ability to play in cash games and tournaments. Other sites allow persons to wager on the outcome of games of skill. They host online competitions that intensify casual games with the thrill of playing for cash and prizes. Here, we focus on what is truly social gaming: prizeless social-network gaming. Most social networking sites have applications where its members can engage in casual games or traditional gambling games like poker. Game developers monetize these games through four principal sources: micro-transactions, virtual goods, advertising and marketing offers. Effectively, regardless of the game offered, the players cannot earn anything of tangible nature. Instead, they can only achieve virtual items that may have utility in the game itself, or in-game currency that cannot be exchanged for real currency. The only value of in-game currency is its use in the game or to buy virtual items like clothing or hats worn by a player’s avatar in the game. Sometimes these social gaming activities are free, and in others, persons can buy chips, tokens or virtual currency to play the games. The most common gambling prohibition is games of chance. This is where a person pays consideration, usually money, for the opportunity to win a prize in a game of chance. If the elements of consideration and chance are present but the award of a prize is eliminated, then the activity will be legal, in most, if not all states. But, understanding the differences in state law affects the risk in that state. Alabama has a typical gambling statute that defines gambling as risking “something of value upon the outcome of a contest of chance or a future contingent event not under the person’s control,” with the goal of winning

By Tony Cabot

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The First State is First For Full iGaming

he tiny state of Delaware is known as “The First State” because its delegates were the first to ratify the U.S. Constitution in 1787. In 2013, Delaware is again the first state—in this case, the first to offer full-blown internet gaming. In October, Delaware executed a “soft launch” of its internet gaming program, opening up a full slate of real-money casino games online to around 75 people who had registered through the websites of the state’s three casinos. According to Ed Sutor, CEO of the Dover Downs racino, the restricted live test of the internet casinos lasted “about a week,” after which players were able to register to and play casino games for real money online, as long as they are within the borders of the Delaware. While Nevada was the first overall to offer iGaming, that state’s program is limited to internet poker. In Delaware, players will be able to access and wager on a full slate of casino games, including slots, roulette, blackjack and video poker in addition to the standard Texas hold ‘em variety of poker. On November 26 (after press time), New Jersey followed Delaware with its own full slate of casino games online. New Jersey staged a similar test period of one week to assure the system works smoothly. Sutor says players have been able to warm up to online play by registering at the websites of Dover Downs, Delaware Park or Harrington Raceway and answering a few basic questions, but the security questions will be much more extensive to register for online play. He says Delaware has a system in place to verify a player’s age by matching address records with state driver’s license records. Geolocation technology relies not only on a computer’s IP address, but also on a required mobile phone or tablet. Once registered to play, a text message is sent to the player’s mobile device, which requires a response. The system then “pings” the player’s mobile device to make sure he or she is within the state borders of Delaware. The games on the real-money sites will be the same as those that continue to be available for free42

play now. Dover Downs’ site links to IGT’s DoubleDown Casino on Facebook, which includes a variety of slot games, video poker, roulette, blackjack, bingo and competitive poker. Sutor said the target market for Delaware iGaming is young adults, ages 28 to 35, who do not go to casinos currently. He said that while the overall revenue expected—around $5 million this fiscal year—is not large, the hope is that the gaming sites will create new gamblers, and thus new business for casinos that have been struggling as new competition has come on line in Maryland and Pennsylvania. For now, though, the launch of internet gaming “is another chapter in Delaware’s history of staying competitive in the gaming industry,” Finance Secretary Tim Cook told the News Journal. “It is something that has to grow but we’re in a fiercely competitive environment here. This is just one more opportunity for entertainment.” Cook, like Sutor, said the goal is to create new gaming customers, rather than having current players at brick-and-mortar casinos go and play online. He said migrating those increasingly valuable brickand-mortar customers to the internet would be “a step back” that would take business away from the racinos. Sutor, in comments to the newspaper, noted that internet gaming is “going to happen no matter what. The internet is part of everyday life. Some people do all their banking and stock transactions online. You are either going to get on the train or be left behind. We are going to get on the train.” He added that iGaming will be “just another source of income to an industry that has been knocked on its heels by the competition by neighboring states and the sour economy. We want to protect our brick and mortar and our investment and jobs.”

bwin.party Gets NJ Waiver; PokerStars May Be Rejected

he New Jersey Division of Gaming Enforcement was on record as stating that after preliminary investigations, online gaming operating partners of the Atlantic City casinos would be granted transactional waivers in order to operate casinos upon the launch of legal online gaming in the state on November 26. A full investigation would later be completed before the compa-

Global Gaming Business DECEMBER 2013

nies were granted full online gaming licenses in the state. In October, Borgata’s online partner, bwin.party Digital Entertainment, was granted such a waiver. But the waiver was only granted after two of the founders of bwin.party struck a deal with the DGE to sell their stakes rather than apply for individual licenses. Two original founders of Party Gaming, Ruth Parasol and her husband Russ DeLeon, have struck a deal with the DGE to sell their shares in bwin.party as the company seeks an online gaming license in the state. The two are divesting for “personal privacy” reasons, according to a bwin.party press release. “As part of the application process, certain substantial shareholders of bwin.party are required to submit individual license applications to the DGE,” bwin.party said in a press release. The biggest online gaming question in New Jersey since it was legalized was how state regulatory authorities would treat PokerStars, the rogue online gaming operator that continued to operate in the U.S. after the passage of the Unlawful Internet Gaming Enforcement Act in 2006. PokerStars paid over $700 million to settle the charges with the Justice Department, and is barred by legislation, along with other companies that failed to withdraw from the U.S. gaming market, from participation in Nevada and Delaware. New Jersey, however, had no such “bad actor” clause in its legislation, preferring instead to allow regulators to make the determination. While bwin.party did withdraw from the U.S., PokerStars made billions by refusing to do so. The settlement with the U.S. Justice Department forced company Chairman Isai Scheinberg to step down, and he remains a fugitive to this day. His son Mark Scheinberg took over as chairman. Last month, sources told GGB that the DGE had given PokerStars an ultimatum that Mark Scheinberg and two other company officials must step down in order to obtain the same transactional waiver that bwin.party was given. The company has yet to respond. Even in New Jersey, PokerStars has a colorful history. Last year, the company agreed to buy the Atlantic Club casino for $50 million, which would have immediately qualified it to hold an online gaming license, pending investigation. But when PokerStars failed to meet deadlines outlined in the agreement, the Atlantic Club canceled the deal, keeping the $11 million down payment. Earlier this year, PokerStars reached an agreement with Resorts Casino Hotel to become its online gaming partner. As part of the deal, the company agreed to build a $10 million poker room at Resorts, pending licensing, a deal endangered by this possible rejection.

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Electronic table games are moving to the cutting edge of casino games

E-Mazing! By Dave Bontempo and Frank Legato

lectronic games are steadily climbing the casino ladder. Operators consider this relatively young asset a multifaceted tool. E-games produce revenue streams with or without trained dealers, reduce the time between hands or craps rolls, increase the speed of play and enhance the bottom line. They also provide low-limit betting stations and help lure customers at off-peak hours. Players like the flexibility of e-games. They become training tables for players wishing to learn in a low-pressure climate, a method by which to wager faster, and a glimpse of fantasy. Visually resplendent, beautifully lit devices scream “play me.” Or, at least, “watch me.” Electronic games have become increasingly prominent and profitable. That surge should continue as live online gaming recruits more customers and offers more options to play. The e-game advance brings a high-octane rush from industry leaders to supply product. The process is exciting. In fact, it’s electric.

BEST OF BOTH WORLDS Faster play and lower minimums are inherent benefits of e-tables, but many players miss the interaction with a live dealer. Addressing this are a variety of hybrid table systems that combine human interaction with automated betting and payments. One of the newest is the “AccuPLAY System” from TCSJohnHuxley, a modular system capable of hosting dozens of players for a single game, virtually at the same speed as one player against the dealer. AccuPLAY is a touch-screen live card table utilizing a patented system that detects all wagers, card values and payoffs electronically. The system incorporates electronic play stations around a table with a live dealer. Alternatively, an “electronic shoe” can be used for completely automated operation. The system allows “real card action at electronic speeds,” the company says. “This patented system, with integral electronics, enhances security and supports a range of casino games.” Another top TCSJohnHuxley e-table is “MultiPLAY,” a system that places the entire game on a giant touch-screen LCD that mimics a live table. “MultiPLAY was designed to meet the demand for a live table with a lifelike, life-sized electronic betting screen,” says Luke Davis, director of 44

Global Gaming Business DECEMBER 2013

marketing for TCSJohnHuxley. “This means that players can gather around the table as they would with a traditional live table and still enjoy the social elements of the traditional game.” MultiPLAY also can incorporate elements of live games, including live croupiers and an automated dice that can be transferred from player to player, like the live game. “MultiPLAY merges a traditional roulette, craps or sic bo table with either a live croupier or automated roulette wheel or automatic dice recognition system and a fully electronic multiplayer betting surface,” Davis says. “Featuring a 56-inch Quad HD LCD screen, MultiPLAY was initially launched with a manually operated roulette wheel before automated versions of the game were developed.” TCSJohnHuxley also offers a complete range of other multi-player electronic table games, including the DigiDeal Digital Table System (DTS), which offers a range of card games in either automated mode or with a live dealer/host to maintain the live-game feel. With the new e-table, operators can choose between using traditional live cards or virtual cards. Play proceeds with virtual chip selection and betting, real-time card peeking and up-to-date credit and player bank information. The DTS also has full network capabilities and is compatible with back-end financial tracking systems. The company also offers Super Sic Bo, with a unique 55-inch high-resolution play surface; and the complete Nov Unity II line of automated electronic table games, under a distribution deal with Novomatic.

SHARING THE WEALTH Galaxy Gaming parlays electronics and electronic games into a new product push. The Las Vegas company manufacturers table games, including side bets that can be played with such games as blackjack. Galaxy also distributes TableMax, an automated table game that offers blackjack without a dealer. Its latest hot ticket is MegaShare, a dynamic linking of different games. A player can win at a table he’s not even seated at. He can wager one progressive dollar for a jackpot on a game he plays. But a second progressive bet gives him a multigame progressive wager, at another location. This formula could apply to about 20 games. MegaShare is currently offered in several Washington state casinos, accord-

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HOLY HOLOGRAM! ing to Dean Barnett, Galaxy’s national sales manager. The company expects to expand the principle after applying for a special license to link systems within Nevada. That rollout could occur in the first half of 2014 and connect Las Vegas with Laughlin, for example. “You may play a hand in Las Vegas and win a jackpot, on another game, in another city, and perhaps someday in another state,” Barnett says. “It’s awesome. You can win substantially on a game, even if you were not even there.” And it’s only a buck. MegaShare grew from the Bonus Jackpot System Galaxy installed about five years ago, which constitutes a one-wager play for a progressive jackpot. MegaShare expands the concept. The payout process is fully automated within the system. The system will detail the jackpot amount, the number of MegaShare winners, where each are seated (table and seat position) and how much each is to be paid. While MegaShare is aimed for a major score, Galaxy also offers TableMax, an electronic, automated table game. It appeals to players who prefer anonymity and low limits. They can also enjoy side bets on Lucky Ladies and 21 plus 3. It has three- and five-player units. The action occurs faster than in a regular table game. TableMax is viewed as a means to teach people the game in a low-pressure situation.

Interblock USA has added two layers of excitement to its product range. The company is already well-known as a subsidiary of Slovenia’s Elektroncek d.d. Interblock is a globally recognized trademark of automated electro-mechanical and video roulette, dice and card products. Elektroncek, under the Interblock name, distributes its products in more than 50 countries around the world, with more than 30,000 stations installed worldwide. December brought a new G-5 line, which provides “some more engine power” via high-def graphics and larger screens, according to Tom O’Brien, CEO of Interblock USA. To complement this rollout, Interblock is prepared to unveil the first large-sized hologram on a Strip property in the DecemberJanuary time frame. This promises to be a game-changer. It was 3D at G2E when Interblock demonstrated its blockbuster new product, Hologram Gaming Lounge, to the casino world. Interblock expects it to hit many casino floors in March or April. The product highlights holograms, the photographic images that are three-dimensional and appear to have depth. They work by creating an image composed of two superimposed two-dimensional pictures of the same object seen from different reference points. For Interblock, that means a holographic projection system bringing precisely crafted three-dimensional, full-color moving images to life, creating the illusion of real dealers and live games, taking player interaction with

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tors can’t get people to play,” O’Brien says. “This will entice players. They will say, ‘Wow, what is this? We want to come play this game.’ This is something geared toward the younger generation as well.”

BOLTING FROM THE GATE

Interblock G4 Organic Card

gaming to a new level. Displayed on stage in front of players, the realistic projections are linked with electronic table games to convey the action. Dealers throw 3D dice and cards into the virtual sphere, matching up game-play in real time. This product may represent the crossroads of automation, animation and entertainment. “We have already shown products that have helped operators save money and labor costs,” O’Brien indicates, “but now we are putting an entertainment element on top of it. When you put the two together, you can’t miss. If you look at some games out there, you see continuous loops of people saying ‘place your bets, no more bets,’ etc. That can bore customers to death. Here, we have 60-100 clips of different women, different men, different outfits, changing themes, etc. You can also make it seasonal. You can turn pretty women into elves, make them flip the cards, spice it up.” The largest hologram enables around 50 games, the medium 28 and the smallest 22, O’Brien indicates. Baccarat and multi-game blackjack will be the most prominent, but craps is coming. So are slots, thanks to a hologram attached to the machine to display outcomes. While that product looms down the road, the others are coming fast and furious. Interblock also announced a partnership at G2E with U.K.-based Musion, world leader in holographic technology. The agreement gives Interblock the exclusive master global license to use Musion Eyeliner holographic technology on gaming floors. Combining Musion Eyeliner technology with Interblock’s range of gaming products, the holographic solution incorporates Interblock PlayStation, Game Generator, Animation Generator, and can be used as a player information display linked to existing Interblock gaming devices. Games that will become available on the Musion Interblock 3D system include Roulette, Sic Bo, Craps, Color Craps, Blackjack, Baccarat, Big3Six, Pop’n Poker and Keno. In addition to its high-tech gaming functionality, the holographic video projection system enables casinos to display scheduled entertainment such as tournament announcements, jackpot winners and sponsored promotional content. Where is the best location for the hologram? “I think it works best in some dull areas of the property, where opera46

Global Gaming Business DECEMBER 2013

LT Game, a subsidiary of Hong Kong-listed Paradise Entertainment Ltd., is the dominant supplier of electronic table games in Macau. When the company branched out to Las Vegas last year, it quickly sprouted wings. The Las Vegas outfit, responsible for sales and marketing outside of Macau, has already produced installs both in Melbourne and in its own backyard. The Palazzo in Las Vegas now sports 24 units under the Stadium Gaming product line (also known as the Live Multi Game system) for LT. “This a very exciting time for LT Game International,” says Brad Glencross, technical and support manager for the company. “Our success in Macau is there for all to see, with over 3,000 seats installed. Our first installation outside of our Macau base is Crown Casino, Melbourne Australia started with 20 seats and increased to 150 seats in less than a year. “This installation in Las Vegas, which we hope is the first of many in mainland U.S., will showcase to the American public and operators what all the fuss is about.” Glencross believes his company found a solid niche. “The lack of competition in the ETG segment in the North American market has seen it stagnate and part from some companies offering newgeneration, random-number-generator-style games,” he says. “No progress has been recognized in the live dealer-dealt games in the electronic table games portion of the market. Five years ago, ETGs were viewed as niche products possibly taking up a small corner of the main gaming floor as an introduction for low-limit players to experience a live game of roulette or baccarat. Nowadays, these products have become a line in their own right.” The LT Game products allow electronic wagering in a live game. Players make bets on a player terminal with full TITO support. They can select two baccarat tables operated by one dealer using two shoes, or one roulette table. The dealer will either draw the cards or spin the ball to start the action. The outcome is fed directly to the player terminal through a live video feed window. All of the results are sent to the system in real time through an intelligent shoe or wheel ball reader. The dealer confirms the result and win/loss is calculated for each player with festive animation appearing for winners. The players can easily switch between games or engage in multiple games. They can also save games they have wagered. If players wish to leave the table they simply collect a TITO ticket and leave. The benefit to the operators is huge, Glencross says: multiple games, no chips, no more dealing errors and an electronic platform for marketing, enabling promotions that can easily be fed directly to players in real time. “It offers a low-limit cost game to players with high turnover,” he says. “The opportunity of more hands per hour and higher volume of wagers will give a higher margin than traditional table games.”

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NEW GAME REVIEW by Frank Legato

Carnival in Rio 2 Multimedia Games

his is Multimedia’s long-awaited sequel to what has been one of the slot-maker’s biggest hits, Carnival in Rio. Carnival in Rio 2 is a 100line game on a four-by-five screen. As with the original, models were used to create the realistic dancing animation that forms wild reels. In this case, they’re called “Samba Wilds.” The main feature is a free-spin bonus round, which makes the most of the 100-line setup. There is a credit bonus awarded simply for triggering the freespin round—twice the total bet with three triggering symbols, 10 times the bet with four, 25 times the bet with five. After the bonus is awarded, seven free spins play out, with frequently landing bonus symbols to re-trigger the event with another seven spins. This can continue until a maximum of 70 free spins play out. Carnival in Rio 2 also introduces “Must-Hit Jackpots” to the theme. Two progressive meters are at the top of the top-box monitor. On the penny version of the game, the progressives reset at $154.50 for the top prize and $21.75 on the secondary progressive. The jackpots on this version must hit by $300 and $40, respectively. The game is available in denominations through dollars, so multiples of

those jackpot amounts apply depending on the denomination chosen. In any case, the “Must Hit By” amounts are on the front of the display, which is designed to cause “jackpot fever”-type coin-in as the must-hit level of the jackpot approaches. Manufacturer: Multimedia Games Platform: Multimedia Operating System Format: Five-reel, 100-line video slot Denomination: .01, .02, .03, .05, .10, .25, .50, 1.00 Max Bet: 250 Top Award: 158,070 Hit Frequency: Approximately 50% Theoretical Hold: 2.05%—14.97%

The Walking Dead Aristocrat Technologies

ristocrat’s Innovation Studio, headed by designer Ted Hase, was responsible for this masterful take on The Walking Dead, the AMC series that is the No. 1 drama in the history of basic cable TV. The game is housed in the Vervehd platform, which features a 31.5-inch vertical LCD monitor with high-definition video, and booming, immersive sound provided by the “Sound iChair,” Aristocrat’s version of the vibrating surround-sound seat. It’s the same format used for the previous hit from Hase’s team, the Tarzan series of games. And like those games, The Walking Dead features a full lineup of bonus features, including two wheel bonuses and a number of other simple events that interconnect with each other. The primary game is unique in itself—it is a six-reel game, with four spaces per reel, initially. During the primary game, a feature called “Reel Growth” causes the four middle reels to grow from four spaces to as high as seven spaces, with the expanded field recalculated for additional wins. Those wins are helped along with a separate feature called “Wild Attack.” This is where the theme comes in, as zombies wander across the screen to turn symbols in the expanded screen into wild symbols. Video clips from the popular series appear throughout the game, including zombie appearances in all the other bonus features. The play screen is superimposed over a vision of post-apocalyptic Atlanta, which is where the series is set. 48

Global Gaming Business DECEMBER 2013

The menacing zombies wander about in front of giant bonus wheels in two separate wheel bonuses, the “Atlanta Wheel” and the “CDC Wheel.” The Atlanta Wheel awards credits, the free-games bonus or one of four levels of progressive. The player is eligible for any of the three on-site bonuses with a minimum bet of 75 credits. The maximum bet of 300 credits activates the top jackpot, a multi-site prize resetting at $500,000. The CDC wheel is viewed from the side, to award credits, multipliers or a separate “Walker Bonus.” Also on the wheel is a hand grenade, which explodes to combine several credit awards into one major prize. The “Escape from Atlanta Free Games” include guaranteed wild symbols, and more zombies wandering across the screen. The visuals in the game draw heavily from the series, including some images that are fairly graphic for a slot. But Aristocrat officials predict that remaining true to the series—gore and all—is what will attract players who are devotees of the series. Manufacturer: Aristocrat Technologies Platform: Vervehd Format: Six-reel, “Reel Power” video slot Denomination: .01 Max Bet: 300 Top Award: Progressive; $500,000 reset Hit Frequency: Approximately 50% Theoretical Hold: 6.5%—11.5%

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CUTTING EDGE by Frank Legato

Currency Control Product: PPM Advance Manufacturer: MEI

EI has released the next generation of its “PPM,” or portable programming module, that simplifies the download of necessary updates to its currency-handling systems, such as the SC Advance note acceptor. PPM Advance provides new functionality to technicians and reduces overall cost to operators, according to the company. Enhancements to the PPM followed the same script as the SC note acceptor. Whereas the PPM was a one-button flash tool, the PPM Advance is a portable version of MEI’s STS (support and test systems) software. The PPM Advance features a display screen and menu navigation buttons to allow operators to perform:

• fast and easy in-field updates for currency data; • configuration data and software; • performance diagnostics; and, • audit data reporting.

PPM Advance features include increased memory to store multiple variant firmware, along with the ability to function under multiple languages. Operators also will have the ability to label firmware for individual needs, which, as an example, could be used for OEM-specific identification. The PPM Advance can also sense the host unit— whether it is Cashflow SC or SC advance—and ensures the right software is downloaded. Operators no longer have to update their slot floor separately, freeing up resources and creating labor savings. Additionally, the PPM Advance can be configured to offer an upgrade to Bluetooth functionality with phones and tablets on the Android platform. Operators will now be able to remotely download software from their secured internet/intranet locations as well as add Easitrax Soft Count asset numbers. For more information, visit meigroup.com.

Ticket to Win Product: Rub4Riches Manufacturer: GTECH

TECH has introduced several new bonus modules for its Galaxis player tracking system. At the recent Global Gaming Expo, the company launched a stand-alone jackpot module for Galaxis called “JP2go,” and a packaged solution called “System2go.” One of the most novel Galaxis modules launched at the trade show is called “Rub4Riches.” Rub4Riches allows casinos to reward loyal play with what amounts to a video version of a scratch-off lottery ticket. Once a player reaches a play threshold predetermined by the casino, Rub4Riches, which works on the Crystal.NET player interface, displays a scratch-off ticket on a touch-screen service window. The player then simply rubs the spots on the screen to reveal a credit reward. Players can use the interface to scratch to win a variety of different bonuses directly at the slots. According to the company, the video lottery tickets are customizable to include proprietary prizes (comped rooms,

meals, etc.) and casino-specific images. “This new, customizable bonusing tool allows casinos to design targeted campaigns using sophisticated segmentation criteria to promote player loyalty clubs, reward loyal customers, and/or encourage longer play,” says a release from the company. For more information, contact 506878-6471 or visit gtech.com.

DECEMBER 2013 www.ggbmagazine.com

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Tracking Technology Player-tracking strategies develop with the latest technological advances

By Rodric J. Hurdle-Bradford

he expansion of the gaming industry past its Atlantic City and Las Vegas roots has been the leading domestic story for the last two decades, and now that the expansion is part of the permanent landscape, casinos and vendors have turned their attention to tracking players’ gaming and non-gaming spend. “Casinos, like most business enterprises, are swimming in a sea of data,” says Glenn Goulet, chief executive officer of Table Trac, Inc. “The challenge is the ability to pull out what you need and take decisive action. With player and guest acquisition costs rising, the ability for casino operators to understand the total spend and lifetime value of guests is quickly becoming a key component in any casino management system.” The ability to track player activity really serves several purposes. First, the individual property gets to accommodate the player’s needs and habits with the appropriate promotional offers. Second, that property gets to share the information with its “sister” properties under the same brand across the United States. This is especially important for regions that are dense with gambling areas, like the Louisiana and Mississippi areas or Arizona, California and Nevada in the Pacific Southwest. From a macro standpoint, tracking player activity allows for casinos to develop group trend analysis, not just individual habits. The biggest trend is the activity being tracked, and the analysis being developed is focused nearly as much on non-gaming spend. “Whether the money spent is in retail shops, hotel nights, dining or entertainment, today’s savvy casino operators understand that spending time cultivating the experience with their most loyal players and guests will, in the end, drive revenues,” says Goulet. “Today’s casino management systems must be able to identify the moments in the guests’ journey where the most value is generated—and then maximize those returns.”

Global Gaming Business DECEMBER 2013

The age of “Big Data” Although it is one of the hot buzzwords across several industries, the ability to capture, analyze and quantify massive amounts of consumer information or “big data” is on the forefront of all player tracking technology. Big data can be used efficiently to drive revenue and increase margins, which drives the interest of big data by publicly held casino brands whose shareholders always want increased revenue streams. “Everyone is looking for big data to target their promotions,” says Tom Doyle,

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“Today’s casino management systems must be able to identify the moments in the guests’ journey where the most value is generated—and then maximize those returns.” —Glenn Goulet, CEO, Table Trac, Inc.

vice president of systems product management with Bally Technologies. “It is what you do with that data to increase response rates, or modify a campaign to increase your return rate, which may mean having players show up at a different time or a different day of the week.” Big data gives casino players a singular unified voice they do not even know they have. As the domestic casino landscape continues to be more competitive than ever, the entry of big data into the industry allows for quantifiable value propositions against competitors, and that emphasis on dollar value ultimately benefits the player. A byproduct of this trend is the enhanced ability to communicate with players. Before, mail delivery was the preferred route of delivering player promotions, but with big data, casinos are now identifying the best ways to contact players, whether it be via text message, social media or more traditional communication vehicles. “The main difference is in the marketing and management teams that best understand the type and depth of reporting we have been providing casinos for years,” says Bill Stackhouse, spokesman for SMP Communications Corporation, manufacturer of Kaliedoscope, a unique player portal that reads directly from the player tracking system and continuously updates vital player information. “It is almost impossible to be confident in making decisions without the data to support, track and measure the results.” One area in big data that is often ignored or not even collected are players’ interests. With the trend of non-gaming spend steadily increasing, Stackhouse hopes Kaliedscope’s focus on this area will position the company for future success. “For years the player interest information has never been entered into the tracking system; that is one of the prime reasons we developed Kaleidoscope,” says Stackhouse. “The player now fills out their own, very detailed interest survey that ties directly to their play history. Now we don’t have to guess which of our best slot players also like boxing. They have already told us.” The ability to capture big data means different things to different vendors. For Genesis Gaming Solutions, the unique ability to capture

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live table game wagering using the company’s proprietary “retro fit” product has found a solid niche. The ability to place sensors under the table felt to track live wagering is a combination of big data and new technology that is not often found on the casino floor. “We want to be at the forefront of the industry with our type of valuable information,” says Randy Knust, president of Genesis Gaming Solutions, whose Bravo Poker System and Bravo Pit Systems are popular on casino floors. “We are helping casinos more accurately rate and compensate their players, no matter what level of gaming they are participating in.” Another unique way casinos are using the table game big data offered by Genesis Gaming is by using it to rank dealers, grade their performance and develop coaching and mentoring plans for dealers. It also allows for a better estimate of hands played per hour and any correlation to size of wagers being placed. “Our product also has the ability to monitor side bets with an entirely new

“As

groups. They use the platform to fully manage, extract, analyze and control vital casino and player information. Bally SMS Solutions fully equip clients to handle slot monitoring and operations, including promotional coupons to players based on wagering. The Bally CMS solution includes software products to manage player tracking and analysis, player’s club enrollment and redemptions. Bally Technologies’ SlotScanner Player Tracking Module is a bonus system where players accumulate points by placing their loyalty cards into the slot machine. Points are awarded to the players’ account according to their bet and can be exchanged for food and beverages, various gadgets, casino coupons and services or cash back. The best players can be awarded with privileged status. “This solution increases customer satisfaction because it allows casinos more time to address the specific promotional match with a guest,” says Doyle. “It ties slot management, casino and hospitality together in a very useful way.” Customer interaction still reigns supreme, and that is why SMP Communications equipped Kaleidoscope with a live chat feature for the player to the casino, as well as a comments section to speak directly with casino management. It also tracks routine information such as points earned toward their next card level, banked points and their value. It also has a direct link to their casino host or customer service representative. Kaleidoscope also features an event invitation and RSVP management module created specifically to the players’ interests learned through a simple survey at sign-up. “Because each player is tied to their unique data, the casino can determine an automated email distribution plan whereby any time a negative comment is received, the player’s value to the casino determines where the email goes, which is displayed immediately,” says Stackhouse. “The highest-value player’s comments may go directly to the general manager and marketing director, where the lesser-value player’s comments may just go to a customer service representative trained in how to promote service recovery.” On the opposite end of the customer service spectrum, one of the value promotions that Genesis Gaming gives its clients is that their table game wager tracking prevents overcompensation of players by casinos, which also directly affects the bottom line. Their ability to use sensors under tables to monitor wagers and side bets has dramatically enhanced the accuracy of their casino clients. “Table games are expensive, with a lot of overhead, and floor space is always at a premium,” says Knust. “We are able to optimize the gaming mix to get a higher return.” For Goulet and Table Trac, the product PlayItVision allows for unique marketing and service window/picture-in-picture style functionality. This

biometrics are infused with more mobile devices to employees and customers, it will enhance the overall experience.”

—Tom Doyle, VP of Systems Product Management, Bally Technologies

level of detail,” says Knust. “It is great for tracking player skill level in a certain game and identifying which promotional offers should work best.” What is working best with big data is that this dynamic information is streamlining many manual operations in the player research department. Whether it is tracking spending, personal interests or live table game wagering, it has opened the way for an entirely new gaming experience. “The main outcome of all this data collection and analysis must boil down to the ability to define the value,” says Goulet. “That means link your analytics to business value—how will these numbers increase revenue, create operational efficiencies and most important, increase customer satisfaction?”

The Place for Products With player tracking technology in such demand, the marketplace for these products varies greatly, especially with the presence of big data. Because the availability of big data is so new, both traditional industry heavyweights and smaller companies are battling to bring the latest and greatest to their clients. The software platform for the player tracking technology is sometimes just as important as the tracking program itself. Bally Technologies runs successful programs of both IBM and Microsoft Windows platforms. Bally has been successful using both for a decade. The IBM iSeries platform is home to the Bally SMS and CMS product 52

Global Gaming Business DECEMBER 2013

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ANALYTICS THAT SHAPE ROI STRATEGY ing areas is not nearly as profitable as the gaming spend. We see some properties developing programs for frequent hotel stays or frequent concert purchases.” Their product, Kai, “listens” to a casino’s slot system and instantly detects machine events like hand-paid jackpots and bill jams, and dispatches the most qualified, available employee to respond. Although different than traditional player tracking systems, Kai definitely assists with casino efficiency. “Right now Kai is focused on improving Enhancing Efficiency the slot department’s workflow,” says Corby. Mention the term operational efficiency to many “But we see opportunities for Kai to help imcasino managers in various departments and prove customer service through all areas of a they are as likely to discuss player promotions casino and resort.” and outreach, just as much as internal staffing isSince a player’s options on game play are sues. The focus on a player’s “total value,” both limited, Stackhouse of Kaliedoscope believes the gaming and non-gaming spend, means that most unique information in a casino’s grading players is not as simple as it player tracking system is an individwas a couple of years ago. ual’s personal tastes. This includes pref“The use of biometrics is everyerences in movies, sports, television where in chips, face recognition and and shopping. They also specifically employees performing transactions track local media preferences, so techand players using their reward nically the player tracking begins becards,” says Doyle. “As biometrics fore a person even steps onto the are infused with more mobile deproperty. vices to employees and customers, it “Results are reported in real time, will enhance the overall experience.” and the dashboard analytics allow the The big data collected by the latcasino analyst to view responses by est player tracking systems and the nearly endless criteria combinations,” ability to review the data in real time says Stackhouse. “Each query can be allow for player promotions that are filtered by player value, gender, age, designed for their social habits as distance from casino and more. A much as their wagering practices. casino can find out how many players This especially helps the casino The KAI feature 35 years and older, that are worth property maintain efficiency if the from Acres 4.0 $200 per trip, and like live boxing with promotion is to a show that is not a couple of clicks on the dashboard.” routinely sold out, a retail destinaRegardless of whether the players are in Las tion during off-peak hours or particular casino Vegas or Louisiana, Mississippi or Michigan, games that are slow during weekdays. they become the ultimate winner during this “Certainly the spend has changed, but the battle for big data in player tracking. tracking of non-gaming spend is trailing quite a “The players are in control,” says Goulet. bit behind gaming,” says Roy Corby, chief oper“Just as the iPod put the internet and the world ating officer of Acres 4.0, developer and manuof entertainment in the palms of many people, facturer of Kai, a workflow product that allows technology development in player tracking has for real-time solutions on slot machines. “Howalso worked to give players the advantage.” ever, in general the increased spend in non-gamprovides players with the opportunity to manage certain aspects of their player’s club account directly at the machine, compared to having to use a promotional kiosk or traditional player’s club station. “The new player tracking feature allows operators to have the ability to deliver timely interactive promotions,” says Goulet. “This includes tickets to special events or shows, and dispensing food vouchers.”

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EMERGING LEADERS Social Butterfly Cary Conrady Social Media Strategist, Pechanga Resort & Casino ary Conrady has always been a “non-traditional” marketer. She recalls one story early in her career which hinted at her independent and “outsider” approach. During her college years at Cal Poly, San Luis Obispo, Conrady’s blogging skills landed her a job as an intern at an award-winning marketing firm. Conrady recalls one client in particular who was spending thousands of dollars on traditional print ads in magazines. Considering their target audience and how niche the product was, Cary convinced the client and the marketing firm to move all the ad dollars into “non-traditional advertising,” which at the time included the newly launched ads on Facebook, Google AdWords and other SEO tactics to drive potential clients to the website. Conrady’s supervisors, who came from BBDO and Ogilvy, had strong traditional marketing backgrounds and taught her all they knew about marketing and consumer psychology. Online advertising was not the norm for them, but they took a big chance on letting Conrady run the campaign. The student became the teacher, as the result was a 600 percent increase in sales. The client literally could not produce enough product to keep up with the demand, and Conrady had to pause the ad campaign. Conrady’s success using online and social media marketing for many of the firm’s clients led to her being offered a job as part-time instructor at Cuesta Community College in San Luis Obispo, at the age of 26, making her the youngest instructor the institution had hired to date. In the two short years Conrady has been at Pechanga Resort and Casino in Temecula, California, she has helped increase the resort’s Facebook traffic from fewer than 60,000 fans to almost 300,000 fans. She has helped build Instagram and YouTube followings as well. With the help of the operator’s video team, Pechanga had a YouTube video for the new “Plants vs. Zombies” slot machine reach over 7.4 million views this year—setting the record of most-watched YouTube video ever in the casino industry. “I think Pechanga’s emphasis and support for social media sets them apart in the industry, and it is why we have seen such great results. My success is the direct result of Pechanga’s emphasis on staying ahead of the curve and investing in new

media,” says Conrady. These successes earned Conrady the American Gaming Association’s Communications Awards for Social Media and a “Best in Show” Sherpie Award at this year’s G2E. “When I started my career, online and social media marketing were definitely considered ‘non-traditional’ marketing, and in the casino industry they still are,” she says. “It’s only a matter of time before online and social media marketing are the norm or ‘traditional’ marketing. And with new and exciting iGaming opportunities in the future of casinos, it’s never been a better time to be a social media strategist at a casino, in my opinion. I love what I do and I’m looking forward to blazing a trail.” —David Rittvo

“I think Pechanga’s emphasis and 5 Tool Player support for J.T. Foley social media Director of Government Relations and Community sets them apart Development, Las Vegas Sands in the industry, .T. Foley has been in the Las Vegas and it is why JRelations Sands Corporation Government and Community Developwe have seen ment group since 2007. Now a director in the organization, the such great 31-year-old is the archetype of an results.” emerging leader who has made a de-

Global Gaming Business DECEMBER 2013

cisive and immediate impact in the gaming industry. Foley came to Las Vegas six and a half years ago from Omaha, Nebraska without any previous exposure to the casino industry. Learning quickly from his self-described mentor, LVS Senior Vice President Andy Abboud, he has since been involved with such diverse efforts as new gaming and destination resort development, standards compliance, advancement of gaming legislation, destination resorts, and other related lobbying, political and community affairs initiatives. With such a remarkable resumé of responsibilities, it speaks volumes about his character and willingness to help others to hear him describe the greatest accomplishment of his career to date. “The most gratifying experience I have had here relates to my contributions to our company’s ‘Salute Our Troops Weekends,’” Foley explains. “(LVS CEO Sheldon) Adelson had the idea to give back to our nation’s veterans and wounded warriors, so we began hosting VIP events scheduled around Armed Forces Day and Veterans Day to thank our American heroes for their service. “We coordinate transportation on Mr. Adelson’s private jet, provide complimentary rooms, arrange poker tournaments, schedule celebrity appearances and more. I have been involved with organizing six of these events to date, and can’t begin to describe the feeling I get watching dozens of deserving veterans and their families be greeted by a thousand flag-waving employees from Vene-

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