Global Gaming Business Magazine, May 2017 by Global Gaming Business

GGB Global Gaming Business Magazine

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May 2017 • Vol. 16 • no. 5 • $10

Demystified The process going forward and the models being considered

Following Fingerprints Why it’s crucial to know more about your online players

Mature Mississippi How the ‘miracle’ has evolved

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CONTENTS

Vol. 16 • No. 5

may

Global Gaming Business Magazine

24 COVER STORY Special Report: Casinos in Japan As the Japanese Diet considers the particulars of legislation to set up the new casino industry authorized in December, the gaming industry ponders what could be one of its most lucrative new markets.

COLUMNS 12 AGA Odds-On Favorite Geoff Freeman

14 Fantini’s Finance Macau Momentum Frank Fantini

32 Global Gaming Women Participate, Vote, Run Virginia McDowell

34 Skill Games The Case for Incremental Revenue Blaine Graboyes

52 Operations The Holistic View

Japan’s Finish Line Major operators are lining up to pledge big investment in Japan’s coming casino market. Here’s what needs to be done before the first roll of the dice and spin of the wheels and reels. By Chris Sieroty

FEATURES

18 Monetizing VR With the technologies of virtual reality and augmented reality advancing rapidly, the gaming industry considers the best ways to profit from the technology in new games and attractions. By Frank Legato

28 Considering the Model Will Japan’s new casino market go the way of Macau with multiple integrated resorts, or the way of Singapore, which has two controlled and very profitable integrated resorts? The coming months will tell. By Marjorie Preston

42 Mississippi Rising Twenty-five years into the gaming industry’s “Mississippi Miracle,” operators who have lived through natural disasters, business failures and great rebounds look to the future of a strong business. By Dave Palermo

48 Ticket Power Developers of ticket-in/ticket-out slotmachine technology look to transform the pit as they have transformed the slot floor. By Dave Bontempo

Feature 36 Doing It Right While regulations governing how new online gaming sites identify players may seem cumbersome to unaccustomed players, they are absolutely necessary to establish a viable industry. By Steve Ruddock 4

Global Gaming Business MAY 2017

Marco Benvenuti

56 Table Games Escaping Vigorish Roger Snow

DEPARTMENTS 6 8 10 16 54

The Agenda By the Numbers 5 Questions AGEM Page Emerging Leaders

With William Hill Online’s Itay Fisher and Lucky Dragon’s Jordan Seager

58 60 61 62 65 66

New Game Review Cutting Edge Frankly Speaking Goods & Services People Casino Communications

With Andrew Cardno, Founder and Chief Technology Officer, VizExplorer

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

40 iGames News Roundup

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THE AGENDA

Follow Your Dream

Roger Gros, Publisher

ou probably wouldn’t be reading the words on this page if I had ever gotten promoted in the casinos where I worked. It started with my first job in the casino industry. I was selected to be in the first dealers’ class for the Boardwalk Regency, the original name of the Caesars property in Atlantic City. I did very well, finishing at the top of my class, and in line to be one of the better dealers. But then I ran into licensing issues. Apparently the investigators didn’t know what to do with the year I lived in Argentina in the early ’70s, so my license was delayed for four months. When I finally began working, I was relegated to the trenches—dozens of $2 and $5 minimum games that were full of fleas from opening to closing time (in those days, Atlantic City casinos were required to have a certain number of low-limit games and were also required to close every day for a few hours). I couldn’t get the attention of the bosses, so I asked the casino manager if I should take another game. “No,” he told me. “You can go just as far with one game as with multiple games.” I didn’t listen to him, fortunately, so when they offered a baccarat class I took advantage of it, and was soon transferred to the baccarat pit. It was like a different world in there—high rollers, elegant women, lots of money… and all the bosses hanging around. I soon impressed them with my baccarat dealing skills. I was assigned to the high-limit games with the most pressure and the most discerning players. Bosses sweated the money— most of them, anyway—but saw no flaws in my dealing. But my one flaw—a fatal one, apparently—was I couldn’t keep my mouth shut. I ventured my opinion on things like how the pit should be run, and what players were more important than others. Soon, I saw some of my classmates getting promoted with me being left behind. So I was a prime target when some Golden Nugget executives came around recruiting dealers for their baccarat games. The Golden Nugget had been open a year and quickly sup-

Global Gaming Business MAY 2017

planted Caesars as the preferred spot for the high rollers in Atlantic City. I jumped at the chance to work for Steve Wynn and didn’t look back. The experience at the Golden Nugget was invaluable—including the opportunity to meet Wynn when he would come sit at a dead baccarat game and shoot the bull with the dealers and supervisors. It was a Ph.D. in gaming. But my seniority at the Nugget was far behind all the original dealers, and I knew I’d never get promoted there. So when Steve Wynn sold the Nugget and it became Bally’s Grand, I knew my time was coming to an end there. When one of my pit bosses at the Nugget moved to the next new casino, the Showboat, I followed him there with the promise of a promotion dangled in front of me. The Showboat, however, turned out to be a disaster, poorly organized and run. I became resigned to play out the string. At that time, I had begun writing for the casino employee magazine in Atlantic City, and asked my editor for a regular salary (far below what I was making as a dealer, supplemented by commissions from ad sales), and I decided to rely on a talent I knew I had rather that the “juice” I knew I didn’t have. It was tough dropping my standard of living, and my adult children now joke about the “good old days” of poverty. In the end, it all worked out. I became the only trade journalist in the casino industry who actually had experience working in a casino. Those “bosses” I tried to impress at Caesars, the Golden Nugget and Showboat became the toplevel executives at many companies across the industry. They knew I had the casino chops, so conversations with them were deep and fruitful. Finally I had juice! So a hearty thanks to those who passed me over for promotions that in retrospect I probably didn’t deserve. And while unlike lots of people who read GGB, I was never a fan of working for a casino, I love writing about them. So once I decided to follow my passion, my life and attitude improved markedly.

Vol. 16 • No. 5 • MAY 2017 Roger Gros, Publisher | rgros@ggbmagazine.com twitter: @GlobalGamingBiz Frank Legato, Editor | flegato@ggbmagazine.com twitter: @FranklySpeakn Monica Cooley, Art Director | cooley7@sunflower.com John Buyachek, Director, Sales & Marketing jbchek@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com Becky Kingman-Gros, Chief Operating Officer bkingros@ggbmagazine.com Lisa Johnson, Communications Advisor lisa@lisajohnsoncommunications.com twitter: @LisaJohnsonPR Columnists Marco Benvenuti | Frank Fantini twitter: @FantiniResearch Geoff Freeman twitter: @GeoffFreemanAGA Blaine Graboyes | Virginia McDowell | Roger Snow Contributing Editors Dave Bontempo | Dave Palermo twitter: @DavePalermo4 Marjorie Preston | Steve Ruddock twitter: @SteveRuddock Chris Sieroty | William Sokolic Michael Soll

EDITORIAL ADVISORY BOARD Rino Armeni, President, Armeni Enterprises

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

• Julie Brinkerhoff-Jacobs, President, Lifescapes International

• Nicholas Casiello Jr., Shareholder, Fox Rothschild

• Jeffrey Compton, Publisher, CDC E-Reports twitter: @CDCNewswire

• Geoff Freeman, President & CEO, American Gaming Association twitter: @GeoffFreemanAGA

• Dean Macomber, President, Macomber International, Inc.

• Stephen Martino, Vice President & Chief Compliance Officer, MGM Resorts International, twitter: @stephenmartino

• Jim Rafferty, President, Rafferty & Associates

• Thomas Reilly, Vice President Systems Sales, Scientific Games

• Steven M. Rittvo, Chairman Emeritus, The Innovation Group twitter: @InnovGrp

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

• Ernie Stevens, Jr., Chairman, National Indian Gaming Association twitter: @NIGA1985

• Roy Student, President, Applied Management Strategies

• David D. Waddell, Partner Regulatory Management Counselors PC Casino Connection International LLC. 901 American Pacific Drive, Suite 180 • Henderson, Nevada 89014 702-248-1565 • 702-248-1567 (fax) www.ggbmagazine.com The views and opinions expressed by the writers and columnists of GLOBAL GAMING BUSINESS are not necessarily the views of the publisher or editor. Copyright 2017 Global Gaming Business LLC. Henderson, Nevada 89014 GLOBAL GAMING BUSINESS is published monthly by Casino Connection International, LLC. Printed in Nevada, USA. Postmaster: Send Change of Address forms to: 901 American Pacific Dr, Suite 180, Henderson, NV 89014 Official Publication

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BY THE

NUMBERS

trIBAL trActIon t

ribal gaming profits in the United States are setting new records, reaching $30.5 billion in 2015, according to the 15th edition of Casino City’s Indian Gaming Industry Report, released last month by Dr. Alan Meister, an economist specializing in Indian gaming. That’s 5 percent higher than the year before. In 2015 there were 242 tribes that operated 494 casinos in 28 states, with 357,000 slot machines and 7,700 table games. The growth is the sixth year in a row for tribal gaming. The industry, which includes non-gaming amenities that are part of some casinos, directly and indirectly created $103 billion in economic activity, 770,000 jobs, $35.5 billion in wages and $1.76 billion that tribes shared with state governments. Gaming patrons spent about $40 billion. The map shows the percent of increase/decrease for tribal gaming revenues in each state.

JoBS LookInG Up In AtLAntIc cIty

hile still on the downside of job growth, employment in Atlantic City and its casino industry is beginning to rebound. The “lost decade” may be coming to a close now that the city has stabilized and there have been no more casino closures since Trump Taj Mahal shut its doors last year. In the most recent edition of the South Jersey Economic Review, authored by Oliver Cooke, an associate professor of economics at Stockton University’s William J. Hughes Center, job losses are the smallest in the last 10 years, except for 2012, when the star-crossed Revel opened its doors. For a complete issue of the report, which examines all economic data for the casino industry, Atlantic City and all of South Jersey, visit stockton.edu/hughescenter/sjer/sjer.html.

Global Gaming Business MAY 2017

Indian Gaming Growth By State

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NUTSHELL

“They

5Questions

Brian Musburger

Founder and Chairman, VSiN (Vegas Stats & Information Network) SiN (Vegas Stats & Information Network) captured the public’s attention at the end of 2016 when Vandlegendary sports broadcaster Brent Musburger ended his long career to join the company, founded operated by his nephew, Brian Musburger. VSiN has set up shop in the South Point casino hotel sports book area and broadcasts sports information 24 hours a day. Brian Musburger spoke with GGB Publisher Roger Gros the week before the Super Bowl, when VSiN launched. To hear a full podcast of this interview, visit GGGMagazine.com.

1 2 3 4 5

GGB: How long have you been planning this endeavor? Musburger: A long time. We’ve been gearing up for this for almost four years now. The idea came from the fact that I knew the guys who know the most about sports were the guys whose livelihood depends upon it—guys like Jimmy Vaccaro, Chris Andrews, Vinnie Magliulo. They have such a unique take on sports, there’s no one who can break it down better than they can. It’s a different kind of sports network.

Is it just going to be a network that broadcasts on radio or TV, and how are you going to make money? It’s going to be more than that. However you want the news, we want to get it to you that way. In the beginning we’re on SiriusXM Rush for five hours a day, seven days a week. There will be an app eventually where you’ll be able to stream the shows in any format you want, audio or video. We’ll be rolling out new products on a regular basis. In the beginning, we’re going to be very heavily advertising-driven with Sirius and with our web partner, American Eagle. We’ll explore the idea of a subscription model down the road. Right now, we’re viewing it as a “freemium” model, but eventually there will be tools we’ll put behind a paywall.

So who else will be the experts? Al Bernstein, the great boxing commentator, is doing a daily two-hour show. And then we have a couple of young guys we’re excited about including Bill Alexander, who’s done a sports podcast for quite a while about the new shape of sports betting. Brent will do a show called My Guys in the Desert where he will tap into the expertise of the sports betting experts in town. Most of our guys won’t take outrageous positions just to make headlines. If they say something, they have to back it up. The new technology in sports betting, like in-game betting, is really groundbreaking. How will you handle that? We see tremendous opportunities in this kind of technology. We’re going to experiment with some ingaming wagering and different technologies to reach that audience that’s paying attention to this new technology. More than anything, we want to de-mystify sports betting and give people a better understanding of what’s being done by the line-makers and why they make those decisions. We want to give you the news you need to win. But we’re not a tout service. Even if you’re not betting on sports, you’ll be a more informed viewer.

What sports are you going to cover? Anything you can bet on? Anything you can bet on. Absolutely. Worldwide. We’re talking to a guy now who is an expert on Aussie Rules Football. And another guy who knows cricket. We’re not going to do those segments on our Sirius show, but in addition to the live linear content, we’re also going to have on-demand content. If you let us know you’re into cricket, we’ll find a guy who can help you be more informed about how to wager on cricket. We’ll be all over MMA and golf, as well.

Global Gaming Business MAY 2017

Said It”

“Who the hell is going to corrupt an NFL quarterback when they make $25 million a year? What are they going to offer them? A new car?” —Casino mogul Steve Wynn, on the absurdity of National Football League Commissioner Roger Goodell’s argument that legal sports betting would endanger the integrity of football

CALENDAR May 2-4: Southern Gaming Summit, Mississippi Coast Coliseum & Convention Center, Biloxi. Produced by BNP Media. For more information, visit SGSummit.com. May 10-12: IMGL Spring Conference, Turnberry Isle, Miami, Florida. Produced by the International Masters of Gaming Law. For more information, visit IMGL.org. May 16-18: G2E Asia, the Venetian Macao. Produced by the American Gaming Association and Reed Exhibitions. For more information, visit G2EAsia.com. May 22-24: Western Leadership Development Conference, Green Valley Ranch Resort, Las Vegas. Produced by Global Gaming Women. For more information, visit ggwscholarships.fluidreview.com. May 24-25: East Coast Gaming Congress, Harrah’s Waterfront Resort and Conference Center, Atlantic City. Produced by Spectrum Gaming Group, Cooper Levenson and Friedmutter Group Architecture & Design Studios. For more information, visit EastCoastGamingCongress.com. May 30-June 1: IAGA International Gaming Summit, JW Marriott Essex House, New York City. Produced by the International Association of Gaming Advisors. For more information, visit TheIAGA.org. June 9-11: National Council of Legislators from Gaming States (NCLGS) Summer Meeting, Westin Denver Downtown Hotel, Denver, Colorado. Produced by NCLGS. For more information, visit www.nclgs.org.

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Global Gaming Business MAY 2017

Lift the harmful, failing federal ban on sports betting By Geoff Freeman, President & CEO, American Gaming Association

ports betting’s popularity is soaring to new heights. In February, nearly 50 million Americans wagered on the NFL’s grand finale an estimated $4.7 billion— but only a little over $100 million of that was legally wagered in Nevada. In March, Americans put down $10.4 billion on the NCAA men’s basketball tournament, but only $295 million will have been done legally. A new Morning Consult poll released last month shows that fans of every NFL team overwhelmingly support lifting the federal ban on sports betting, and think states, not the federal government, should decide whether to allow sports betting within state borders. However, thanks to a 25-year-old failing federal ban, nearly every bet is placed illegally. But a perfect storm of events could soon change this. First, illegal betting continues to grow, making clear the ban isn’t working. Instead, it’s pushing betting into the shadows, where at least $150 billion is wagered annually without any consumer or game protections. It’s also depriving state and local governments of tax revenue that could be paying for vital public services, such as infrastructure, education and law enforcement. The culprit of the ban is the Professional and Amateur Sports Protection Act, or PASPA, which permits only Nevada to offer full-fledged, traditional sports betting. President George H.W. Bush signed the ban into law in 1992. The following year, a prominent Atlantic City casino owner advocated for permitting New Jersey to offer sports betting. “You have to be” in favor of it, he said. “It is vital to keeping your taxes low, it’s vital to the senior citizens, and it’s vital to putting the bookies out of business.” That casino owner is now the president of the United States. President Trump reiterated his views on

sports betting and the massive illegal market that continues to grow in an interview with FOX Sports in November 2015. “I’m OK with (sports betting and daily fantasy sports) because it’s happening anyway. Whether you have (legalized sports betting) or you don’t have it, you have it.” Then there’s Congress. As casino gaming has become a mainstream, omnipresent industry that operates in 40 states instead of just a few, more and more members of Congress represent districts in which their constituents work in a casino and their communities benefit from millions of dollars of tax revenue from gaming. We believe states should have the power to decide whether to allow sports betting and how best to regulate it, just as they do commercial and tribal casinos and other forms of gaming. The benefits are manifold. First, a regulated market would give states the ability to regulate and monitor the sports betting market and diminish the flow of money that fuels criminal organizations. Second, an open, transparent market— along with modern analytics technology—makes tracking betting much easier, and thus strengthens the integrity of sports. Finally, lifting the ban in favor of a legal, regulated market would give fans what they want. When a new casino opens outside of Nevada, many first-time visitors are surprised when they can’t find the sports book. Yet they clearly find a way to bet on games. Allowing states to oversee sports betting would create an environment of strict regulation, rigorous consumer protections and robust tools for law enforcement and leagues to root out illegal gambling and uphold the integrity of games. That’s a far better solution than a failed federal ban that turns millions of American sports fans into criminals every game day. Follow Geoff Freeman on Twitter at @GeoffFreemanAGA.

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FANTINI’S FINANCE

Macau Momentum From Google searches to increased revenues, the outlook for companies operating in the Asian gaming capital is looking up.

ou can Google that. That phrase has become a part of daily life. Now, Googling apparently is part of the analysis that goes into predicting stock prices. At least that’s an inference drawn from the Morgan Stanley equity analytical team. In a recent report, Thomas Allen and Praveen Choudhary and company used an increase in Google searches as part of the reason to reiterate their bullish call on Wynn Resorts and Wynn Macau. Google searches for Wynn in Macau have increased by 94 percent and now surpass Galaxy Entertainment and Melco Crown properties, they noted. And, while more Chinese use Baidu than Google, there has been a correlation between Google searches and casino performance, they said. Of course, Google searches aren’t the only reason to be bullish on Wynn in Macau. Another factor they cited, and one mentioned repeatedly by CEO Steve Wynn himself, is that Wynn properties usually start more slowly than other companies, then ramp up. They cited Wynn Macau, which gained 3.7 percentage points of market share from its opening a decade ago into its second year. If Wynn Palace matches Wynn Macau’s pattern, it would make for a nice bump in the stock price. Allen and Choudhary estimate that every one-half of a percentage point rise in share of mass-market adds $4 to $5 to the stock price and every half-point in VIP adds $1.70. Allen put a buy rating and $119 target on WYNN, but thinks the stock could reach $201.

MACAU OPTIMISM Optimism over Macau isn’t limited to Wynn Resorts or Morgan Stanley. Bullishness has been growing generally as gaming revenues have risen. Part of the optimism is a feeling that the Chinese government’s anti-corruption campaign has run its course and that VIP players who stayed away because of the stigmatization attached to 14

Global Gaming Business MAY 2017

By Frank Fantini

visiting Macau are now returning. Another example of a relaxed attitude by the national and Macanese governments might be the now-apparent willingness to allow smoking lounges in casinos. Further, competition from neighboring countries has clearly gotten the attention of the national and Macanese governments. That was evident in the arrest of marketing executives of companies trying to attract players to their casinos in foreign countries, as happened with South Koreans in 2015 and Australians last year. As is generally known now, it is illegal to market gambling on the Chinese mainland, which means representatives of foreign casinos try to sell their properties as vacation resorts. The Chinese government, however, gets to decide for itself when the line has been crossed to selling gambling, not amenities. The point is the same as has been mentioned in this space several times; the Chinese government has made clear that it is not cracking down on Macau gambling just to allow foreign countries to poach its gamblers.

GAMING CONCESSIONS The next test of whether there’s a more constructive government attitude towards Macau casinos will come with the negotiation of gaming concessions. With the first concessions expiring in 2020, the government might want to start negotiating in the next year or so. The guess as to what the government will negotiate ranges from the status quo to failing to renew one or two of the concessions. Generally, it is believed that the government will renew concessions with all six operators, and will not increase the number of concessions. As part of this, it is thought each operator will get its own concession, doing away with the sub-concessions. There is also a growing feeling that Macau might lower the gaming tax in response to the much lower taxes of neighboring countries that are luring casino developers. No doubt, the government will make new demands on casino companies, but a lower gaming tax would surely send the message that China sees Macau’s gambling industry as a long-term asset.

U.S. REGIONAL CASINOS U.S. regional casinos have been steadily improving their performance in recent years, and Penn National recently gave investors reason to cheer by upping its financial guidance for the first quarter. PENN now expects to generate $222 million to $223 million in adjusted EBITDA in the quarter, compared to an earlier estimate of $209.3 million, and EBITDA after rental payments to Gaming & Leisure Properties of $110 million to $111 million vs. earlier guidance of $97.4 million. The improvement is based on strong property performance across the company, CEO Tim Wilmott said. Further, Wilmott said, PENN’s pursuit of operating efficiencies bodes well for the balance of the year and for efforts to “increase cash flows, reduce leverage and return capital to shareholders.” And, though Wilmott did not address the subject in the company news release, those results come despite the opening of MGM Resorts’ National Harbor casino near Washington, D.C., that is crimping revenues at PENN’s Hollywood Casino in the Washington exurb of Charles Town, West Virginia. As might be expected, investors converted their cheers into a higher stock price as PENN jumped 11.63 percent on the announcement. The two other biggest regional casino operators also benefited from PENN’s announcement as Boyd shares advanced 3.88 percent and Pinnacle 5.06 percent on a day the overall market declined. The after-lease EBITDA growth of 13 percent to 14 percent comes on much more modest revenue growth of a little over 1 percent, which further emphasizes Wilmott’s point of operating efficiencies. That also lends credence to optimism for PNK and BYD, where management continues to emphasize efficiencies and cost controls. The question raised in recent quarters is about revenue growth under the assumption that higher cash flow based on operational efficiencies can be achieved for only so long. The Penn National announcement suggests that point hasn’t yet arrived. 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.fantiniresearch.com.

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AGEMupdate AGEM MEMBER PROFILE

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APRIL 2017 KEY BOARD OF DIRECTORS ACTIONS â&#x20AC;˘ AGEM continues to have dialogue with the Nevada Gaming Control Board and the attorney generalâ&#x20AC;&#x2122;s office on account wagering and other issues contained within proposed Regulations 5 and 5A. Separately, on April 5, a notice was posted by GCB Chairman A.G. Burnett outlining new proposals ultimately designed to help speed up the approval process of new products or changes to products. AGEM members will have a chance to weigh in when a meeting with GCB Technology Chief Jim Barbee is finalized. â&#x20AC;˘ AGEM approved support of two important educational initiatives recently. The UNLV Center For Gaming Innovation received $10,000 in funding that will go towards new equipment to aid studentsâ&#x20AC;&#x2122; development of gaming innovations. For the third year in a row, a contribution of $10,000 was also awarded to the American Indian College Fund AGEM Scholarship. This worthwhile and very successful cause provides full scholarships for multiple students each year. â&#x20AC;˘ AGEM members discussed the recent activity in Florida that could be promising for gaming regulations to be passed this year, although the Senate and House bills have vastly different goals. One seeks to expand, while the other wishes to freeze gambling. However, the Florida Legislature is fast approaching its last regularly scheduled session day. The state Senate and House are set to adjourn for the year on May 5, adding urgency in finding a resolution to the gambling dilemma. â&#x20AC;˘ The European Casino Association recently appointed Philip Easthill as executive director. Easthill has been working with AGEM regarding E.U. initiatives that might impact members. A proposed directive on liability for defective products is currently in consultation, and might change the rules that are decided at E.U. level.

UPCOMING EVENTS â&#x20AC;˘ The Japan Gaming Congress takes place May 10-11 in Tokyo. AGEM members approved a sponsorship of $15,000 to support the Congress and ensure that AGEM has a strong presence in this important new market. â&#x20AC;˘ AGEM will be very visible at G2E Asia in Macau May 16-18 in support of show partners American Gaming Association and Reed Expo. â&#x20AC;˘ The European Dealer Championship will be held May 8-10 at the Hippodrome Casino in London. AGEM is once again sponsoring this important event that brings together dealers from all over Europe to compete for the top prize.

AGEMindex The AGEM Index reached another record high in March, continuing the momentum from previous months. The composite index stood at 361.28 points at the close of March 2017, which represents an increase of 9.84 points, or 2.8 percent, when compared to February 2017. The AGEM Index reported a year-over-year increase for the 18th consecutive month, rising 136.93 points, or 61.0 percent, when compared to March 2016. During the latest period, nine of the 13 global gaming equipment manufacturers reported month-to-month increases in stock price, with three up by more than 10 percent. Four manufacturers reported decreases in stock price during the month, with three experiencing double-digit losses.

AGEM

Global Gaming Business MAY 2017

Stock Price At Month End Percent Change Mar-17 Feb-17 Mar-16 Prior Period Prior Year

Index Contribution

Nasdaq: AGYS (US$)

9.45

9.10

10.21

3.85

(7.44)

0.11

Ainsworth Game Technology

ASX: AGI (AU$)

1.84

1.75

2.33

5.14

(21.03)

0.27

Aristocrat Technologies

ASX: ALL (AU$)

17.97

16.60

10.30

8.25

74.47

8.58

Taiwan: 3064 (NT$)

19.10

22.60

54.70

(65.08)

(0.09)

Agilysys

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

Exchange: Symbol (Currency)

Astro Corp. Crane Co. Everi Holdings Inc. Galaxy Gaming Inc. Gaming Partners International International Game Technology PLC

NYSE: CR (US$)

74.83

72.29

53.86

3.51

38.93

2.02

NYSE: EVRI (US$)

4.79

3.25

2.29

47.38

109.17

1.94

OTCMKTS: GLXZ (US$)

0.63

0.56

0.22

12.50

186.36

0.04

Nasdaq: GPIC (US$)

10.00

11.43

9.85

(12.51)

1.52

(0.13)

(12.22)

NYSE: IGT (US$)

23.70

27.00

18.25

INTRALOT S.A.

1.22

1.13

Konami Corp.

TYO: 9766 (ÂĽ)

4,725

4,740

3,330

Nasdaq: SGMS (US$)

23.65

20.65

9.43

Nasdaq: TACT (US$)

8.10

7.40

8.14

Scientific Games Corporation Transact Technologies

(15.49)

29.86

(7.52)

7.96

0.23

(0.32)

41.89

0.40

14.53

150.80

3.91

9.46

0.07

(0.49)

Change in Index Value

9.84

AGEM Index Value: February 2017

351.44

AGEM Index Value: March 2017

361.28

QUALITY IS OUR GUIDE

professionals take the time to understand what you really need, so we can provide the value you deserve that reduces your risk and most important thing we measure, and we hold ourselves to the highest standard. Whether youâ&#x20AC;&#x2122;re a small start-up, large enterprise or an emerging or existing jurisdiction, our

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p. 18 virtualreality:Layout 1 4/18/17 1:56 PM Page 18

{

Horizon

As its technology advances rapidly, the casino industry considers how to monetize virtual reality By Frank Legato

ver since Star Trek: The Next Generation imagined the “Holodeck” two decades ago, fascination has grown with the idea of virtual reality. The Holodeck, you’ll recall, was a room on the starship Enterprise that would be transformed into any computer-generated environment to which the crew wished to be transported for recreation. They would interact in an authentic setting as the captain of a 19th century warship at sea, joust with one of King Arthur’s knights, or engage in any number of other scenarios, physically interacting with three-dimensional, computer-generated objects and characters. Granted, virtual-reality technology since the 1990s has not advanced to the point of the Holodeck, but it may well be on the way. And as the casino-resort industry searches for ways to attract new customers without relying on its longtime cash-cow, the slot machine, virtual reality has become one of gaming’s hottest new buzzwords. Both established and startup gaming manufacturers have been busy working on products that use virtual reality (VR), augmented reality (AR) or some combination of the two, and the first VR products are expected to reach casino floors within the next year. Industry giants like International Game Technology and Scientific Games displayed VR technology at the Global Gaming Expo and ICE Totally Gaming, as did recent startup Gamblit Gaming. Meanwhile, operators across the industry are considering the best ways to monetize VR and AR for the long term—and these efforts promise to gain steam as advancements in the technology speed up. VR hardware, for instance, has been steadily improving, with home video gamers snatching up PlayStation VR, Oculus Rift or HTC Vive headsets to sample an increasing library of interactive experiences that place them inside their games. Next fall, Dreamscape Immersive will launch its flagship VR Multiplex at Westfield Century City Mall in Los Angeles. Billed as a Location-Based Experience (LBE) virtual-reality venture, it will be among the first VR experiences to allow audience members to roam a space untethered, “stepping inside the story” to interact with others in a virtual world. At “The Void,” a VR attraction with locations in New York and London, groups of four can touch and feel objects in real time within a virtual world. (Imagine shooting a “Slimer” in a simulation of Ghostbusters, feel-

Global Gaming Business MAY 2017

BCLC game testing

ing the rumble of your proton pack as you shoot.) And Disney’s research team in Los Angeles recently perfected physical interaction within a virtual environment, allowing a user to catch a physical ball based on the movement of its virtual counterpart. Yes, just like in the Holodeck. Gaming manufacturers are watching these rapid developments closely, but the big question remains to be answered: How can casinos translate this gee-whiz technology into incremental revenue on the casino floor?

Monetizing VR Suppliers and operators currently exploring how to crack the code of monetizing VR in the casino industry are following a methodical approach, and a vision that begins with a pay-to-play attraction in a dedicated area of a resort. “Virtual reality is very much a land-based product today, and it can be monetized through various models,” says Darion Lowenstein, chief marketing officer for Gamblit Gaming. “The first one is a traditional arcade model—pay and play—where basically visitors to the casinos, not necessarily gamblers, can actually pay a fee or a token to participate in the experience.” At G2E last fall, Gamblit demonstrated its Virtual Reality Cube—updated for release by the end of this year as the Virtual Reality Sphere, or VRS—with the game Brookhaven Experiment, a title from Phosphor Games that has the player navigating a spooky world killing zombies with various

p. 18 virtualreality:Layout 1 4/18/17 1:56 PM Page 19

weapons. Meanwhile, IGT’s booth at G2E was crowded with attendees trying out Siege VR, a competition-driven virtual reality experience that leverages HTC Vive technology to transport players to a virtual world where they engage in a bow-and-arrows battle to defend a castle from oncoming aggressors. Matteo Monteverdi, IGT’s senior vice president of global product marketing, interactive, agrees that the first step for monetization of VR in casinos will be as a paid attraction, but he says IGT is viewing this as the first of three possible avenues for casinos to profit from VR technology. “The interesting aspect comes when we move into the gamblification of the experience, which means we basically take this product and transform it into a gambling product,” Monteverdi says. “There are two ways you can do this. The first one we’ve done is integrating virtual reality with the tournament platform. You will be able to buy a ticket and participate in a tournament. The winner of the tournament will get the prize, and the house will take a rake of the tournament amount collected. That obviously is a model very similar to the slot tournament model widely known in the casino industry.” The third potential way to monetize VR, he says, follows the “vSports” model (for virtual-reality sports). In this option, says Monteverdi, “casinos do not plan to monetize only the players, but the viewers of the player experience. Two contestants will play a virtual reality game, and you will be able to bet on who is going to win the skill game—exactly as today you can bet on who is going to win the World Series of Poker. “We want to bring virtual reality into the eSports segment. It will be a vSports event, very much like any other sports event you are able to bet on in any of the biggest Nevada casinos.” This VR model is among many being examined by Scientific Games in its Innovation Lab. Headed by Bryan Kelly, senior vice president of technology, Scientific Games’ Innovation Lab explores technology as it emerges in general consumer markets and determines whether it can be adapted to the casino business—if it can, Kelly hands it over to Scientific Games’ R&D staff for development into a product. Kelly, like other gaming researchers, says VR will initially be a resort attraction, but other potential paths to monetization are likely to develop quickly as companies like Disney and the home-use video game suppliers improve both the hardware and the capabilities of the experience itself. “I don’t feel comfortable yet that VR has a path toward a repetitive play akin to slots or table games,” Kelly says. “I really think it’s not a technology that’s ready for prime-time, for mass market and mass monetization, at the LBE locations.”

At G2E last fall, Gamblit demonstrated its Virtual Reality Cube—updated for release by the end of this year as the Virtual Reality Sphere, or VRS

However, Kelly notes that commercial VR technology is advancing quickly, and as hardware and experiences improve outside of the casino industry, the possibilities multiply within the industry. “Everyone was expecting the VR headsets to take off,” he says. “They were a little bit short of expectations. However, we are starting to see them being bundled in with your cellphone—when you get a new cellphone, sometimes they include the headset that you can pop your phone in. So, as the mass market advances, more people are going to want to experience (VR).”

First Products Lowenstein says this goal is what is driving Gamblit’s Virtual Reality Sphere, which he estimates will launch in casinos late in 2017. “We had a huge amount of success with the Virtual Reality Cube, or VRC, we showed at G2E,” he says. “We found that while everybody loved the VRC, it was a bit too big and cumbersome for the amount of space that it took on a floor. “So, we went back to the drawing board, and tried to bring a lot of the same elements that made the VRC popular—elevating the player on a stage, showcasing their viewpoint to the people around them.” The new Virtual Reality Sphere features a sleek, futuristic dome with tethered VR goggles. Lowenstein says there will be a variety of games, with input devices modeled to fit the activity. “The first version that we’ll be putting out will be entertainment, which means they basically pay a set amount of cash, and you’ll have an entertainment experience for a set amount of time, in probably a couple of different games,” Lowenstein explains. “And then the next version of it, which we expect to be on floors also in markets like Las Vegas by the end of this year, will be actually a wagering version. You’ll be putting money down, and you’ll be betting on your skill level. You’ll either lose or win cash or awards, based on how well you play.” The VRS uses the HTC Vive VR headset, which Lowenstein says is a “room-based VR”—meaning there are integral cameras that track the player’s movements in roughly an 8-by-8-foot play area. Players can move around within the sphere, which he says adds to the experience of a game MAY 2017 www.ggbmagazine.com

p. 18 virtualreality:Layout 1 4/18/17 1:56 PM Page 20

IGT’s Siege VR, previewed at G2E, uses HTC Live technology to create the experience of defending a castle from invaders.

{ like Brookhaven Experiment, where “monsters are coming at you from 360 degrees.” Lowenstein says Gamblit is currently looking at a wide variety of content for new VRS games. “We’ve been speaking to multiple developers throughout the gaming industry, and we’ve been looking at a couple games that are a lot more fun, light-hearted and simple.” IGT’s Siege VR, previewed at G2E, also uses HTC Vive technology to create the experience of defending a castle from invaders. “The company first presented Siege VR as a technology application demo,” explains Monteverdi. “The intent was to gauge operator interest, collect feedback and fortify IGT’s position as a leader in innovation. The feedback was astoundingly positive, but there were questions about how casinos could monetize the solution within the context of gaming.” By the time of the February ICE Totally Gaming trade show, the company had developed its second route to monetization by pairing the Siege VR content with IGT’s tournament platform and Tournament Manager systems solution. “Two players work cooperatively to defend the castle, while scoring is based on hit targets, and is shared by both players,” Monteverdi says. Siege VR is equipped with a customizable state-of-the-art VR stage, he adds, “giving players a fully immersive experience and providing casino properties with an attention-gaining mechanism for highlighting the VR product.” The Siege VR game was created in IGT’s San Francisco game studio in collaboration with external VR experts. Monteverdi comments that Siege VR’s castle-defending game is only the beginning for its VR offerings, and the company’s mission in using the technology is to create new experiences that will appeal not only to younger gamers, but to a broad range of casino customers of all ages. “We are not only exploring the traditional shooting games that are very popular with millennials, but we are exploring games that are more traditional to demographics that visit the casinos,” Monteverdi says. “For example, the Siege VR game, being a shooting game, is considered a game capable of appealing to a wider demographic than only the millennials. But we are very much focused on sports, and we have significant titles and significant content that will be designed to a specific segment that is not the pure millennial.” Scientific Games’ Kelly says his team has been working on virtual-reality applications for some time, and has filed for several patents on products to be commercialized soon. Scientific Games’ Innovation Lab typically works on products around two years from commercialization, so there have been no product announcements. At G2E, customers viewed some of the company’s VR technology in private areas, with no details to be released to the public (or the media) until the R&D team perfects them. 20

Global Gaming Business MAY 2017

However, Kelly is quick to point out several developments in the commercial VR world that have sparked his team’s interest—generally products that will be viable in casinos after a few advancements in technology. “I think there will be some people that do some great innovation to get VR off the ground, show something different, and then add some creative content—something that’s unique,” he says. “Maybe new game mechanics that have never been visualized. I think that’s where there will be an area of opportunity for newcomers to try to penetrate the market. “The big boys and girls, they really just want to have a friction-free, fast-play, fast-monetization product, and I think VR’s a little bit slower. I think it’s niche today.” However, he says advancements in the commercial VR market mean VR will eventually become more than a niche product. And, he says, one area on which to focus will be sports—eSports or virtual sports. With eSports, the viewer drops in on the virtual universe experienced by the player. With virtual sports, VR can place the viewer right on the field, or on the track for a horse race, or at the wheel in a car race. “With virtual sports now, you sit and spectate; you watch a horse race, for example,” says Kelly. “And you spectate with the director’s view of the race. With VR, you could literally pop into the track, and be anywhere on the track. So, I can have my own camera view, my world view, from wherever I want to be. Say I want to sit on top of the fastest rider’s horse. I can now be on that horse.” He adds that the concept can also apply to any shooting-style video game, “so when the shots are flying past, they literally fly right past your head and kill the guy right behind you. The bullets fly right through you—because you’re not in the world; you’re just a spectator standing there in the world, watching like the battle’s going on around you.”

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p. 18 virtualreality:Layout 1 4/18/17 1:56 PM Page 22

{

“We are currently in talks with operators about establishing a responsible gambling room within a casino that, if it works well, would be rolled out across 25 casinos.”

—Jim Peterson, Managing Director, RSG

AR and Online Of course, the emerging technology of virtual reality comes with a first cousin—augmented reality. AR technology allows the viewer to navigate the real world with virtual elements added in. Casinos are considering multiple uses for the technology, from wayfinding—imagine seeing the path to the restroom marked in front of you with a bright yellow, winding arrow—to games in which objects pop up in real time to grab for level-ups or other gains. AR went mainstream, big-time, last year with the Pokémon Go craze, which had people walking around glued to their smartphones, their on-board GPS ability used to locate, capture and battle creatures that would pop up on the screen as if in the same real-world location as the player. Many casino operators and suppliers see unlimited potential for AR, and the fact that no cumbersome hardware is required—cellphones or Microsoft HoloLens-style glasses work fine—means the technology could find its stride much more quickly than VR. “It’s not that I’m bearish on VR; I’m bearish for its use cases for LBE at this state,” comments Scientific Games’ Kelly. “That doesn’t mean that firms like ours won’t come up with a use that works for LBE. But AR, on the other hand, I’m fully bullish on. Part of the reason is it can actually operate on your own cellphone—the existing device you have on your hip. “That picks up a lot of the benefit of VR, and helps customers and employees in the brick-and-mortar casino give more information, do more things. It’s basically your own personal visual signage and personal engagement device, but laid on top of everything you see with your own eyes. And when you see what happened with Pokémon Go when adding gamification to it, we think we can leverage that in a powerful way.” IGT’s Monteverdi is similarly optimistic on AR. “AR is part of our roadmap,” he says. “In fact, in Europe, we just launched interactive augmented reality solutions in the lottery segment. At this point, we are looking at augmented reality in casinos as an extension of our PlaySpot technology.” PlaySpot is IGT’s mobile on-premise product that allows players in a landbased casino to play games through their smartphones while connected to the casino Wi-Fi. “The idea is to add additional content on that slot that includes virtual reality—for example, the ability to have a treasure hunt in the casino, and instead of looking for Pokémon, you’re looking for other objects with which you can collect money or loyalty points.” Of course, VR and AR offer countless other possibilities going forward, not the least of which is in the online gaming arena. The general consensus among experts, though, is that full implementation of virtual reality in an online casino—for instance, walking through a virtual casino, stopping at a table game or slot, etc.—will need to wait for technological advances, particularly in the coordination between software and headsets. Monteverdi comments that one challenge in applying VR to iGaming is latency—the delay between the time a player moves his head and the time he sees a new, corrected version of the scene. “Interactive gaming relies heavily on remote connectivity, with everything being done over the air,” he says. “I can 22

Global Gaming Business MAY 2017

see a future potential that games will be developed in a way that latency won’t be an issue, and we’ll be able to monetize them in the interactive gaming space.”

Exploring the Possibilities Over the next year or two, operators across the casino industry will be exploring how best to marshal virtual-reality technology that is already blossoming in the commercial world. They will have lots of help, from outside consultants to their own customers—as evidenced by some pioneering efforts in Canada. In Toronto, consultancy Research Strategy Group has set up a fully functioning virtualreality lab. According to Managing Director Jim Peterson, RSG has been doing market research and planning in a number of industries, including more than 20 years working with gaming industry clients that include Ontario Lottery and Gaming and Alberta Lottery and Gaming. Peterson says the VR lab—the technology is portable; the company recently set up a lab in its Las Vegas office for operators there—is looking at more than the gamification/monetization of the technology. “We are currently in talks with operators about establishing a responsible gambling room within a casino that, if it works well, would be rolled out across 25 casinos,” he says. “The more we can create environments before people invest in the environment, the better off we will be. In the case of this responsible-gaming site, they’re trying to make it look more friendly.” He says working with VR to help design responsible-gaming areas has applications well beyond this particular function. “The idea is to look at a variety of options in terms of peak colors, the look, the design... We can do that in a way it’s never been done before. Formerly, you would have to look at printouts or color Xerox or boards—quite complicated, and you couldn’t change them out immediately. Now, with the push of a button, we can change the color of the paint, or move furniture in or out. “It could be used to determine where we want to place signage in the casino. It could be used for the redesign of a bar, looking at layouts for where the slots should be, or the number of products in slot selection.” Meanwhile, in Vancouver, British Columbia Lottery Corporation recently called on its customers to help in monetizing VR in game form. BCLC held a “hackathon” at one of its Vancouver-area casinos, in which a contest was held to see who could come up with the best game utilizing virtual-reality technology. “We sponsored a weekend hackathon and offered a prize to the team or person that came up with the best idea for a new game,” says BCLC CEO Jim Lightbody. “It started on a Friday evening at 6 p.m., and there were more than 200 people there. Five people that had never met before joined up, and by 3 p.m. on Sunday they came up with a virtual reality game. “And not only did they win a cash prize for winning the contest, but also we gave them the opportunity to refine the game and work with us. So they formed a company, and we’re currently working with them.”

p. 18 virtualreality:Layout 1 4/18/17 1:56 PM Page 23

2 0 0 0 AT TO R N E YS | 3 8 LO C AT I O N S W O R L D W I D E ˚

The winning game, called Gold Smash, is a group game in which one member defends a pot of gold while others are throwing objects at him. “We see the game actually being played in a landbased environment, where people would join in to play as a group,” Lightbody says. Another game coming out of the hackathon has players trying to escape from a room amid several gambling-themed elements. Lightbody says it’s part of an effort to expand beyond the traditional vendors when considering virtual reality. “We’re not against working with any of the traditional vendors, but virtual-reality technology is actually a booming business here in Vancouver,” he says. “So, we’re challenging them to come up with some concepts for us.” Virtual reality may have taken decades to arrive in the gaming-industry lexicon, but all agree that its rise from here will be rapid, particularly as technology advances and hardware is refined. “I would suspect that within 12 months, we will see much more portability, more easy-to-use glasses, lots of people investing,” comments Peterson. “Once there is consumer acceptance and ease of use, the casinos will no doubt be, if not leading, right there. I think within one year we may see a very different casino world.” “Miniaturization of everything, improving the latency—meaning that there’s zero perceived latency when you move your head—they’re making huge strides in that,” comments Scientific Games’ Kelly. “What we’re focused on here is the design process—that we’re creating games that people actually want to play, and we’re creating environments people actually want to be in.” Kelly adds that wireless headsets, and the creation of environments that do not require human operation, will speed VR’s implementation on a wider scale. Headsets that are used by a parade of customers, he says, must be replaced by a system that allows customers to use their own devices. “Let’s say you use hair gel,” he says. “I’m not going to want to use that headset right after you.” “I think it’s going to take partnerships between the gaming developers and the operators themselves” to develop the technology, says Gamblit’s Lowenstein. “The only limits are what we put on it,” says BCLC’s Lightbody, “and I think that’s why it will be interesting for the industry to really open our eyes to new perspectives on how we can bring new entertainment to the players we currently have, while attracting new players into our sphere.”

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GREENBERG TR AURIG, LLP | ATTORNEYS AT LAW | WWW.GTLAW.COM The hiring of a lawyer is an important decision and should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and our experience. Prior results do not guarantee a similar outcome. Greenberg Traurig is a service mark and trade name of Greenberg Traurig, LLP and Greenberg Traurig, P.A. ©2017 Greenberg Traurig, LLP. Attorneys at Law. All rights reserved. Contact: Mark A. Clayton in Las Vegas at 702.792.3773 °These numbers are subject to fluctuation. ¬Greenberg Traurig’s Berlin office is operated by Greenberg Traurig Germany, an affiliate of Greenberg Traurig, P.A. and Greenberg Traurig, LLP. *Operates as a separate UK registered legal entity. +Operates as Greenberg Traurig, S.C. ∞Operates as Greenberg Traurig LLP Foreign Legal Consultant Office. ^Operates as a branch of Greenberg Traurig, P.A., Florida, USA. ¤Greenberg Traurig Tokyo Law Offices are operated by Greenberg Traurig Horitsu Jimusho, an affiliate of Greenberg Traurig, P.A. and Greenberg Traurig, LLP. ~Greenberg Traurig’s Warsaw office is operated by Greenberg Traurig Grzesiak sp.k., an affiliate of Greenberg Traurig, P.A. and Greenberg Traurig, LLP. Images in this advertisement do not depict Greenberg Traurig attorneys, clients, staff or facilities. 28877

p. 24 japan:Layout 1 4/18/17 1:21 PM Page 24

Now that Japan has finally legalized casino gaming, what will be the process? Who will be permitted to bid? What will the parameters be?

The

Next Steps

By Chris Sieroty

hen Japanese lawmakers passed the Integrated Resort Promotion Bill in December, U.S. casino operators began to develop their plans to compete for licenses in what could become a very lucrative gaming market. And because of the potential Japan offers casino operators, some analysts believe it could become the most expensive gambling market in the world. But how much are Caesars Entertainment Corp., Las Vegas Sands Corp., MGM Resorts International and Wynn Resorts Ltd. willing to spend to enter a sizable and lucrative domestic market with a population of 125 million? Las Vegas Sands says a new integrated resort in Japan could cost between $6 billion and $10 billion, about three times more than it spent on building its new French-themed Parisian resort in Macau. “We’re excited by the recent legislative breakthrough in Japan to permit casino gaming within integrated resorts,” Las Vegas Sands Chairman Sheldon Adelson recently told gaming analysts on a conference call. “The law is being formulated by, I think, the interparty committee that was formed before the first law was passed,” Adelson said. “They have one year to submit an implementation law that will determine the who, what, why, when, where and how of how they are going to establish the integrated resort with the casino bill.” MGM Resorts says it could also spend $10 billion for a new casino in Japan, quadruple the cost of its MGM Cotai resort that is scheduled to open this year. Wynn Resorts hasn’t placed a cost on a resort, though CEO Steve Wynn says the opportunity is “thoroughly delicious.” Wynn Resorts spent more than $4 billion to open the Palace in Macau last August. “Wynn, Las Vegas Sands and MGM are all well positioned to bid on a gaming license in Japan,” says Alex Bumazhny, senior director, corporate ratings with Fitch Ratings. “All have healthy balance sheets relative to U.S. peers and a track record of developing large-scale resorts.” 24

Global Gaming Business MAY 2017

Pachinko parlors are a $30 billion business in Japan. The pinball-style games are very popular—and very addictive—leading to concerns about responsible gaming when casinos are permitted.

Bumazhny gives the nod to Las Vegas Sands, saying they stand out as the “best positioned given their investment-grade balance sheet and broader experience in Asia, including the development of Marina Bay Sands in Singapore.”

Other Voices Yet, these Las Vegas casino operators are going to face competition from other gaming companies, too, including Genting Group, Hard Rock International and Melco Crown Entertainment, who are also prepared to spend billions of dollars to build integrated resorts in Japan. Macau casino operator Galaxy Entertainment Group Ltd. has joined with Societe des Bains de Mer, the operator of the Monaco casinos, hoping the partnership will beat their rivals to win a license when Japan opens its gambling market. Galaxy and SBM will jointly develop and run entertainment businesses including casinos and hotels in Japan and the Asia-Pacific region, the companies said in a statement. The announcement by Galaxy and SBM came about five months after the Upper House of the Diet (Parliament) in Japan approved the “Bill Pro-

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moting Implementation of Specified Integrated Resort Areas,” or the Integrated Resorts (IR) Promotion Bill, paving the way for the future introduction of integrated resorts in the country. “Galaxy’s success in Asia will certainly be a valuable enhancement to SBM’s portfolio,” says Jean-Luc Biamonti, CEO of SBM. SBM is majority-owned by the Mediterranean principality, and since 2005, it is 5 percent-owned by Galaxy. The Monaco firm said it hopes the partnership will help it grow in Asia. Grant Govertsen, a research analyst at Union Gaming in Macau, doesn’t believe this partnership would necessarily impact how Galaxy’s peers view the Japan opportunity, or that it will cause Galaxy’s peers to change their approach. “Ultimately, a local Japanese partner will prove more meaningful than a foreign partner,” Govertsen says. “That said, I don’t think there is any downside for Galaxy to bring SBM on board.” With the passage of the integrated resorts bill, Biamonti said both companies look forward to the possibility of collaborative efforts to design, develop and operate an IR in Japan that would offer the best of what both GEG and SBM have to offer.

Rules & Regs The Japanese legislature is now drafting a second law, due by December, on how to regulate the industry. Japanese Prime Minister Shinzo Abe is targeting the third quarter as the deadline for the bill’s submission, allowing the government to then promote the benefits of casinos—jobs and economic growth—to a skeptical public. According to media reports, Abe expects the legislation to include strict regulations as well as measures to deal with concerns about problem gambling and money laundering. In a recent survey by public broadcaster NHK, only 12 percent of respondents favored removing the ban, with 44 percent opposed and the rest unsure. So, will lawmakers actually make their December deadline? “Based on what we’re hearing, the government is very serious about getting the gaming bill across the finish line, so it does, indeed, feel like it will be wrapped up later this year,” Govertsen says. “That said, we are hopeful that the government will come up with a bill that truly will encourage the scale of development that will result in world-class IR development.” Govertsen adds that to achieve high levels of investment, lawmakers will need to approve local access to casinos and keep the tax rate reasonable. Bumazhny believes the promotion bill passed last year was the “highest hurdle.” “Our sense is that the implementation bill will closely mimic the gaming laws in Singapore, where there are capacity constraints and some restrictions on gambling by locals,” Bumazhny says. “Of course, as in any legislative process, there are uncertainties.” Analysts believe that Japan will likely pick locations and operators in 2019. Steve Gallaway, managing partner with Global Market Advisors, says the second law will not start the RFP process, but will “likely identify the structure for local authorities to participate in the process.” Gallaway expects Osaka, Yokohama and Tokyo as leading contenders for a large facility, with other regional prefectures bidding for smaller regional licenses, such as Sasebo and Hokkaido.

The structure of the market will be determined in the second casino bill, he says. The first casino resort could potentially be online as early as 2023. Before the licensing process begins, it’s expected resort operators, including MGM, Wynn or Hard Rock, would have to form consortia with prospective hosts and domestic companies. Galaxy is also said to be negotiating with national and local governments as well as real estate, construction and transportation companies. But Galaxy wasn’t expected to insist on a stake over 50 percent in any partnership. Galaxy declined to detail the size of any investment in Japan, but its net cash of $2.1 billion would allow it to begin a project without waiting for financing.

Size Matters Just two casinos in major Japanese cities, Tokyo or Osaka, could generate over $10 billion in annual gaming revenue, increasing to $30 billion if 10 further casinos outside metropolitan areas are approved, according to a report by brokerage CLSA. The reason everyone is willing to spend billions when it comes to Japan is because of the revenue numbers CLSA is projecting. Other analysts believe companies are willing to spend billions due to a large, comparatively wealthy population that has shown a high proclivity to gamble. Moreover, the number of licenses issued is likely to be very limited. “Ultimately, Japan is an attractive market because it is deep in terms of population. It is also a wealthy market, and there is a demonstrated proclivity to gamble,” Govertsen says. He says the fact that pachinko is a $30 billion market “suggests the opportunity set for IRs is quite meaningful.” Analysts at Japanese brokerage Nomura believe when all is said and done, there are likely to be just two to three licenses issued. “I don’t think anyone knows for sure,” Gallaway says. “However, knowing that Japan is using Singapore as a model, bidders can be assured that the government will employ a similar process to maximize the benefits of the integrated resort.” Osaka appears to top Gallaway’s list of favorite sites. “Having seen the Osaka site, and knowing that the local prefecture supports its development into an IR, Osaka would appear to have a strong chance of being able to develop an IR and it would be very successful,” he says. “It wouldn’t have any impact on local neighborhoods. The local government wants it.” The expected site in Osaka is a vacant lot adjacent to Universal Studios that has access to the airport, and potential to offer direct ferry service to the airport as well. In the meantime, some companies are willing to spend $6 billion or search for Japanese partners trying to get an edge over casino operators like Sands, MGM and Wynn. “In my opinion, a company won’t get a license without a local partner,” Gallaway says. “It would be frivolous for a company to put forth a bid without one.” Gallaway says those partnerships are about creating “local equity and local relationships.” MAY 2017 www.ggbmagazine.com

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Prime Minister Shinzo Abe is the man behind the integrated resorts drive because they will bring jobs and economic growth

Singapore Swings The most recent market in Asia to legalize casinos was Singapore, which approved the introduction of two casino hotels about a decade ago. With casino revenue of about $3.5 billion last year, Singapore ranks as the second-biggest market in Asia behind Macau. Gambling revenue in the Chinese territory of Macau was $28 billion last year. “Even though hopeful passage through the upper house would still leave the first IR opening date a good five years out, it would be a shot in the arm for sentiment on gaming names, which are already enjoying a tailwind on Macau’s recovery,” Govertsen said in a research report shortly after the first bill was passed. Uncertainties remain. The first casinos are still about seven years away. Newer industry players like South Korea and the Philippines have built resorts of their own. China itself is under a cloud, as its double-digit growth slows and authorities in Beijing continue to tighten control over outflows of money from the country. The vote came as Japan looks for new sources of economic growth. Tourism is an emerging sector, where the economy has traditionally been geared toward exporting manufactured goods rather than attracting visitors. More than 20 million foreign tourists visited Japan in 2016, triple the number from a decade ago. Abe hopes casinos will ignite broader economic growth in Japan and make up for dwindling competitiveness in other industries, some of which like consumer electronics are now dominated by China and South Korea. “Regardless of the economic stagnation, there is considerable pent-up demand in Japan for casino gaming as evident by the robust $30 billion pachinko industry,” Bumazhny says. “Where there is little question casinos in Japan will be very profitable, bigger unknowns that will impact the degree of profitability will be how tight the implementation bill will be in terms of capacity and operating constraints, and the ability to tap into the broader Asian region, China in particular.”

Not So Fast The end of the prohibition on casinos does not mean that anyone could build a Wynn Las Vegas or even a Flamingo in Japan. At first, licenses will be granted to build integrated resorts, which include casinos with hotels, conference centers, entertainment complexes and shopping malls. Regulations governing the bidding and licensing process, as well as the gaming regulations themselves, will be detailed in a separate law. Some forms of gambling are already legal in Japan. The country allows betting on horse, bicycle and boat racing and it runs a national lottery. Pachinko, a derivative of pinball played in parlors nationwide, has a gambling element that is technically illegal but is tolerated by politicians and law enforcement. “In Japan, there are tens of thousands of these machines,” Gallaway says. Japan has been debating whether to legalize casinos since at least 1999. A bill similar to the one that passed in December made progress in Parliament three years ago, but was never voted on. Some lawmakers balked at the potential social problems caused by casinos. Komeito, a Buddhist political party that has been a junior partner in the 26

Global Gaming Business MAY 2017

governing coalition, has been opposed to legalizing gambling. “There is nothing we’ve seen in Japan that currently deals with problem gambling,” Gallaway says. “Problem gambling is an issue there today, due to the lack of responsible gambling awareness at the pachinko parlors.” Gallaway notes that international companies have responsible gaming programs, and are well situated to implement them in a new market. If Japan is looking to model its market on Singapore, Gallaway says they have a very robust problem gambling program because of Las Vegas Sands and Genting Group. Currently, politicians in Japan are finalizing a bill to address gambling addiction as the country continues to move forward to welcoming its first legal casinos. The bill by the country’s two ruling parties—the Liberal Democratic Party (LDP) and Komeito—includes rules for capping individual bets and strict rules on advertising. The parties are even considering restricting admission to integrated resorts. It was not known if the restrictions would be similar to those in Singapore, where local residents have to pay S$100 to enter, or a S$2,000 annual membership fee. “Entrance fees could significantly impact the revenue potential for IRs,” Gallaway says. “Furthermore, there is no evidence that these do anything to curb problem gambling. In fact, some have argued that entrance fees can increase problem gambling as players may choose to bet more to increase their effective odds, when including the impact of the entrance fee.” Nippon Ishin no Kai, a right-leaning party with a base of support in Osaka, submitted a problem gambling bill to the upper house of the Diet in February. In an attempt to address strong public opposition to casinos, the bill identified the need for policies to deal with crime, suicide, poverty, debts and other problems that occur as a result of problem gambling. It also stipulated the need for the government to establish a basic program to deal with problem gambling that will be subject to revision at least once every five years, according to the Japan Times. The newspaper also reported that municipalities would have to map out plans for combating problem gambling that also would be reviewed every five years. Debate over several problem gambling measures is expected to continue during the current Diet session that ends in June. Since 2014, Abe’s party, the Liberal Democrats, has strengthened its hold on parliament. It has become less reliant on Komeito, and found a new ally on the casino issue in Nippon Ishin. Nippon Ishin is the nation’s third-largest political party. As Abe seeks to create a casino industry, an eight-member panel discussing the framework for possible regulations is considering whether to use a permit system that would cover the types of games allowed in the casino and their rule. The panel is also considering casino entrance restrictions and a system of taxes going to national and local governments. Japan was also expected to create a licensing structure similar to Nevada, with a licensing system that includes background checks into academic and criminal records, debts, relationships and other personal aspects of casino employees. Everyone involved in the process expects Japan to implement a licensing regime and open its market to gaming, but the question is how many of the world’s largest gaming companies will actually get to take part in the newest casino market.

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This

Year’s Model By Marjorie Preston

Will Japan’s gaming industry go all-in like Macau, or follow the more limited Singapore example?

billion range. While that figure may be unrealistic, look for a dead-heat competition for the first two to three integrated resort licenses in Japan. Declared suitors include Melco International, MGM Resorts International, Las Vegas Sands Corp., Hard Rock International, Genting and Galaxy Entertainment, some of whom have pledged to invest up to $10 billion in the market. And though the resorts won’t open for five years or more, these operators aren’t letting the grass grow. Galaxy has an office in Tokyo and Hard Rock just launched its Japan division. MGM, which also has a full-time development team working in Japan, already has artists’ renderings of its would-be resort, “MGM Osaka.”

26-month recession and working to attract more mass gamblers, mainstream tourists, business travelers and families. “While gaming dollars are the most important, there’s real value—I mean real value—in rooms revenue, food and beverage revenue and convention and meeting-space revenue,” Gallaway says. “It’s not like Las Vegas in the 1980s, where hotels and food and beverage were purely there to support gaming. In today’s day and age, if you’re going to develop an integrated resort properly, all revenue centers must be profit centers as well.” “In my opinion, they’ll take input from all the different markets, take the best practices from each and apply them in a whole new way—the Japanese way,” says gaming consultant David Rittvo. “Even before the initial enabling legislation was passed, government officials in Japan were studying all kinds of regulatory and business structures. But it will probably be closer to Singapore, with one casino in Osaka, one in Tokyo and/or Yokohama, and possibly some smaller casinos in secondary markets.”

First Things First

Doing the Math

Now lawmakers must hammer out a second bill detailing the regime’s regulatory and tax structures, the number of licenses, etc., a process that could take most of the year. The big question is: Will they do it the Macau way, where the Big 6 concessionaires and their subs operate dozens of casinos? Or the Singapore way, with just two massive (and massively successful) integrated resorts? “They’re definitely looking to the Singapore model,” says Steve Gallaway, managing partner at Global Market Advisors. “The Japanese go at things in a very careful, appropriate manner. I’ve been very impressed with how non-corrupt, clean and safe Japan is, and I think that will feed into the process, the same way it did in Singapore. They got those iconic facilities—Marina Bay Sands and Resorts World Sentosa—because they said, ‘If you say you’re going to build the Taj Mahal, you can’t build the Holiday Inn.’” Japan also is likely to take some lessons from Macau, now pulling out of a

But that $40 billion estimate, first floated by CSLA in 2014? “It’s a stupid number,” says Gallaway. “Let’s assume we have the max, which is five casinos. Now take $40 billion divided by five—that’s $8.5 billion. The largest-grossing casino in the world, Marina Bay Sands, does about US$3.2 billion a year. Are you telling me five casinos in Japan will do two and a half times that? It’s illogical. But this is still a huge opportunity.” And what about operators like Las Vegas Sands CEO Sheldon Adelson and MGM CEO Jim Murren who have said they’ll spend up to $10 billion on an integrated resort in Japan? “On the back of a napkin, yes, that’s justified for a major metropolitan area,” Gallaway says. “But the government would be doing a disservice if they require a minimum investment in people’s RFPs. It’s going to be a very competitive process. Let them bid based on the best project they can develop and

hen Japan’s long-delayed integrated resorts bill passed in December, the world’s leading gaming operators sent up skyrockets. It’s no surprise. A Japanese casino market could be massive, with one brokerage projecting revenues in the $40

Global Gaming Business MAY 2017

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Turning Japanese Bo Bernhard still get that return.” CSLA, by the way, has since moderated its estimate to about $25 billion for a mature industry. By contrast, Morgan Stanley has estimated that a casino market in Japan could be worth “in the range of US$7 billion to US$20 billion.” Cory Morowitz, chairman and managing member of Morowitz Gaming Advisors, says there’s a third model beyond Macau and Singapore: Las Vegas. “Singapore’s been very successful, but I’m not a huge fan of the limited-license model,” he says. “Look at a jurisdiction like Las Vegas, where you’ve had more capital investment than any other market. It’s been great for that town and state, but that’s not been where the world has gone. Each jurisdiction woke up to the fact there are very high margins in this business and you can charge very high tax rates, and that’s where the pendulum has swung. But I’m a purist. I believe unlimited investment guarantees the best experience, the best deal for the customer, and maximum employment.” Japan is starting from a firm foundation, he says: “a stable economy, a stable government and the world’s third largest economy within reasonable distance of a number of other Asian countries. It’s absolutely a great opportunity. The devil is in the details. That’s what they have to work out.”

Public Pushback Opponents of the gaming bill included members of the Buddhist-influenced Komeito party, who are concerned about the social fallout of legal casinos in a country where gambling addiction is said to be rampant. In fact, public support for Prime Minister Shinzo Abe and his cabinet fell by almost 6 percentage points after the bill passed, and in a poll conducted by the Kyodo News Agency, approval of the ruling Liberal Democratic Party dropped to 54.8 percent from 60.7 percent in the immediate aftermath. More than 69 percent of respondents said they opposed the IR bill and only 24.6 percent supported it. The poll also found that 75.3 percent of respondents would not want a casino resort in their neighborhood. Abe’s LDP proposed a few amendments to the bill, including a commitment to help problem gamblers; as in Singapore, that may lead to entry fees or other barriers to entry that are meant to keep locals in check. Is it a good idea? “Vietnam started an income check barrier to allow locals in, and Singapore has done it from a payment perspective, but it needs to be done in a manner that doesn’t go above and beyond what’s warranted in the industry,” says Rittvo. “Singapore demonstrated that it can be a good social safeguard, but the industry would obviously prefer it to be an open situation.” Rittvo points out that gambling is already big business in Japan, and casinos won’t add appreciably to the inventory. In 2015, gamblers there wagered 23.3 trillion yen (US$203 billion) on pachinko and slot machines alone. Though that amount was down by almost one-third from a decade earlier, it amounts to 4 percent of Japan’s gross domestic product. It is also legal in the country to bet on boat, horse, bicycle and motorcycle races and buy lottery tickets. “If you look at pachinko, I think it’s somewhere between 3 million and 4.5 million machines,” he says. “Two casinos would add at the most 5,000 machines to the market.”

Executive Director, International Gaming Institute, University of Nevada, Las Vegas GGB: The talk right now is of two big integrated resorts in Japan— aka the Singapore model. Good idea? Bernhard: Singapore demonstrates that if you develop a thoughtful, transparent RFP process built on best practices, the end result can be highly beneficial for all stakeholders. If we were to identify the single most important factor the Singapore government wanted to see, it was a business-focused plan to enhance and complement local businesses through the MICE product. Clearly, the business objectives and the tourism objectives have been met—and then some. In Japan, many of the normal enticements—jobs, for instance—are not as relevant, and the business environment is already highly robust, though MICE will certainly be attractive. Will there be an emphasis on high rollers, or are those days over? The government will emphasize international high rollers to be sure, and a $10 billion iconic integrated resort in the heart of an internationally respected culture and country will be a must-visit for higher-end tourists. Operators are also hoping for high-end gamblers, and the competition for that customer base is getting increasingly strong against a backdrop of decreasing supply. But if you think about it, there really isn’t a compelling “northern Asia port” right now for high-end gamblers. Vladivostok hasn’t evolved into that destination as yet, and South Korea’s policies have thus far ensured they won’t have the capital investment to build the kind of product that woos these travelers. Meanwhile, southern and central Asia, at least along the Pacific, have significant integrated resort development right now. So Japan could conceivably become that “north Asia port.” Do you expect the government to erect barriers to entry for local players? If you narrowed down the single issue that most concerns the public— and hence, the lawmakers elected by the public—it’s problem gambling. What’s attractive to Japan about Singapore is the latter’s focus on “social safeguards” including the entry fee. It’s likely Japan will embrace the entry-fee concept. The winner in Japan will be someone who builds not only a strong business case but also a strong community case. In Singapore, it was all about MICE. In Japan, it’s all about problem gambling.

MAY 2017 www.ggbmagazine.com

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A possible site in Tokyo would be the city’s fish market, conveniently located alongside highways and public transportation

Renderings for MGM Osaka (above) and Melco Osaka (below)

The proposed site for an Osaka IR is Yumeshima Island (left), which would have no impact on any neighborhood or community within the city

“The government would be doing a disservice if they require a minimum investment in people’s RFPs. Let them bid based on the best project they can develop and still get that return.” —Steve Gallaway, Global Market Advisors

Gallaway cites a Singapore study which showed that since the opening of Marina Bay Sands and Resorts World Sentosa, “the incidence of problem gambling has gone down, and the reason is an aggressive problem gambling program implemented when they opened the casinos. “Where they went wrong, in my opinion, was to try to prevent problem gambling by locals,” he continues. “They instituted a $100 fee they have to pay to get in, or you can pay an annual membership fee of $2,000 and $2,500, and all that really does is make your gamer want to chase the fee. If I was planning to go to the casino and lose $200 but I’ve got to spend $100 to get in, I’m already down $100. So instead of gambling $200, I may go and gamble $500. I’ll have a better chance of winning my money back.”

Taking the Easy Out? As lawmakers work on Part II of the legislation and global operators seek out domestic partners, gaming consultant Dean Macomber of Macomber International Inc. suggests that two giant integrated resorts—the Singapore model—may leave some opportunity on the table. 30

Global Gaming Business MAY 2017

“There’s nothing better than a monopolistic anything—if I got a monopoly for selling chewing gum, give it to me; I’ll make billions. But to maximize the approach, you can have everything from slot routes to slots in bars to small local casinos to regional casinos to destination casinos to IRs, and literally go from $1 million or $2 million to $7 billion or $10 billion.” Officials may see integrated resorts, with billions in investment, as “nomuss, no-fuss, the easiest path between Point A and Point B,” says Macomber. “They don’t have to do much and they’ll come out as heroes. But I don’t think a neutral businessperson would say that’s the only solution—otherwise, why is there Bourbon Street in New Orleans or Beale Street in Memphis? Why is there a Waikiki, a Broadway or even a Las Vegas? Well-defined, successful resort, tourism and leisure destinations work because people like that diversity of restaurants, showrooms, theaters, and so on.” Bottom line, he says, casino development theory suggests there are other models than Singapore and Macau. “Betwixt the two lies some opportunity for a more diverse ownership scheme, a more diverse leisure/entertainment/ casino scheme, risk spread among more investors and operators, and perhaps a better magnet to draw and entertain Japanese and foreign citizens.” His “maximization model” is “a variety of local, regional and destination casinos plus, these days, a full array of iGaming, eGaming, sports betting and the like.” Meanwhile, global operators and analysts continue to tout Japan as the next great gaming jurisdiction. Daniel Cheng, senior vice president of business development, Hard Rock International, has called Japan “the next Macau.” Last year, Lawrence Ho, CEO of Melco Entertainment International Ltd., said, “This opportunity is priceless, and we’ll spend whatever it takes to win.” And Adelson has said, “Japan is the holy grail and the ultimate of business opportunities. Singapore was a warm-up to this.”

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GLOBAL GAMING WOMEN

Participate, Vote, Run Women can make a difference in all phases of life

anuary 21, 2017 was a day that changed the lives of many women across the world. What started out as a small outreach campaign driven by social media to send a message about women’s rights to newly elected president Donald Trump on Inauguration Weekend grew into the largest single-day protest in U.S. history. Media reports place the size of the signature Women’s March on Washington between 400,000 and 500,000 people, with estimated worldwide participation at up to 5 million. Following the marches, organizers reported that over 400 sister marches were held in cities large and small across the United States, and almost 700 across the world on all seven continents. Despite the huge crowds in many large cities, the marches were peaceful and purposeful. Women across the world wanted their voices heard. For many women, it was also both a political and personal awakening, as evidenced by the tidal wave of women who subsequently demonstrated an interest in running for political office. She Should Run is a nonpartisan 501(c)3 organization founded to help expand the talent pool of elected women that provides an online program to help women envision themselves in public leadership roles. According to their website, “women of all backgrounds should have an equal shot at elected leadership, and (that) our country will benefit from having a government with varied perspectives and experiences.” In a New York magazine article in February, She Should Run co-founder and CEO Erin Loos Cutraro said that since the November election, 8,100 women had signed up for the organization’s incubator program to learn how to run for office. Of interest is that Cutraro also said one of the common characteristics of women who run for office is that they run to accomplish something specific, versus simply to gain power. VoteRunLead is another nonpartisan organization offering online training and support for women interested in becoming involved in politics by supporting “the aspirations of women who want to transform our country and democ32

Global Gaming Business MAY 2017

By Virginia McDowell

racy through their participation as leaders.” Since the last federal election, over 6,000 women have signed up to run for office on the site, which provides workshops, webinars, fundraising tips and training. The common denominator between these two organizations is that public service matters, and they provide women with the training and resources to expand their horizons. But just as important is that the availability of their training and workshops provides the women with the confidence to step out of their comfort zones to achieve something that is meaningful to them. At Global Gaming Women, our mission,

“We work in the gaming industry to give women this same confidence in their abilities as these organizations do in the political arena.” while not to directly change the political landscape, is equally as important as we understand how critical confidence is to achieving ambitious goals, and our educational programs are designed to provide women with the power to believe in and have ambition for themselves. We work in the gaming industry to give women this same confidence in their abilities as these organizations do in the political arena. In their “Get to Know Gaming” public affairs campaign, the American Gaming Association highlights the fact that the gaming industry is a diverse workforce, with women comprising nearly half (48 percent), which is higher than the national average, according to the 2012 American Community Survey by the U.S. Census Bureau. But while women represent nearly 50 percent of the gaming workforce, their numbers are

much smaller in the management ranks, with the number dramatically decreasing in the C-suite and at board levels. While lack of opportunity plays a huge role in the disparity, women not feeling that they are qualified for promotions is a significant factor as well. An educational pyramid is the cornerstone of our programming at Global Gaming Women, and is designed to provide critical skills training for women at all levels in our industry to increase their confidence. Our educational topics include planning and goal setting, time management, team building, coaching, communication skills and conflict resolution, among dozens of other business subjects taught by experts and the leading women in the industry. From the Emerging Leaders program for women not currently in management but interested in acquiring the skills for advancement to the W Development Conference for senior executives, there is a program specifically tailored for women who want to advance. The programs are offered regionally across the United States to make programming available close to home, and nearly all Global Gaming Women programs are offered free except for personal travel expenses. Our founding sponsors support our mission to develop the next generation of female leaders in gaming and include a coalition of major commercial and tribal gaming companies, private donors and major industry suppliers. Just as She Should Run and VoteRunLead are providing the training for a female future in politics, Global Gaming Women is providing the educational opportunities that provide the path for upward mobility for a female future in gaming as well. Come join our GGW movement, make your voices heard in your own organizations, and sign up for your future at globalgamingwomen.org. Virginia McDowell retired as president and CEO of Isle of Capri Casinos in April 2016, after a 35-year career in the gaming industry. She currently serves as president and board chair of Global Gaming Women.

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SKILL GAMES

The Case For Incremental Revenue Why the “floor average” isn’t always the best measurement for new gaming products

sk any casino executive what the most important performance metric for slot machines is, and most will answer “performance against floor average” of win per unit per day (WPUPD). For decades, this key data point has been used to rate and evaluate the performance of slot machines and their placement on the casino floor. However, with the desire to engage a younger player base, a trend of stagnant to declining slot revenues and an ongoing reduction in overall slot positions, there is a new and critical metric for casino operators to consider—the potential for incremental revenue from “net new players” who to date do not gamble, often or ever, at slot machines. The decline in gaming revenue has led casino operators to implement strategies that create new, less-profitable revenue streams as reflected in the growth of resort-type properties, along with nightclubs, bars and restaurants across the industry. The key is to attract the younger audience, who frequents the bars and clubs in casinos, and engage them with products on the gaming floor. This will enable casino operators to act on the massive potential of leveraging their prior infrastructure investments to grow their overall profit potential by maintaining non-gaming revenues while increasing gaming revenues at the same time. Skill-based casino games are the right product at the right time to initiate this engagement with net new players. If skill-based casino games garner only 2.5 percent of the current slot machine placements, this would create a $10 billion-plus market by 2021. Assuming half of skill-based gaming players would not typically gamble playing slot machines, as a recent survey indicates, and given the difference in age demographics and interests, this would lead to new revenue of $2 billion or more per year for the U.S. casino market. No other opportunity today offers such a large potential expansion of gaming revenues. Who are these potential net new players for casinos? They are likely under 40 years old today

Global Gaming Business MAY 2017

By Blaine Graboyes

and likely gamers, or video game enthusiasts. Currently, they have no place to gather, socialize and gamble, despite a massive propensity for wagering. In casinos, it’s fair to say that the money comes from the patrons and not the machines. Slot machines and other gaming products are a method to entertain players in exchange for revenues. As a performance metric, floor average likely represents “moving money around the floor” as existing players are attracted to new products. In this way, a new game, no matter how popular, typically does not contribute to a large increase in gaming revenues. Consider a modest casino floor with 1,000 slot machines doing a floor average of $250 WPUPD. This results in an overall “win” for the house of $250,000 per day, or approximately $7.5 million per month. Adding a new slot product that achieves a multiple of floor average likely does not increase overall revenue. In fact it more likely represents an optimization of the floor that allows for a reduction in total slot positions. This is exactly what the industry has seen over the last few decades. Now, imagine the same casino floor if the 50 lowest-performing slot machines have been replaced with new skill-based gaming products— optimally in a dedicated area specifically designed to entertain gamers. The remaining 950 slot machines would then likely see an increase in WPUPD of approximately 5 percent to $263, as the same players will be spending the same money, just across fewer machines. This has been proven with the general reduction in slot positions. As most skill-based games offer a slower player pace, it is accepted that most of them may not achieve WPUPD similar to the highestgrossing slots. However, skill-based games can easily generate $200 WPUPD today, and likely considerably higher as these games are optimized over time in the same manner in which slot machine optimization has improved over the last hundred years. The 50 new skill-based gaming positions

in our hypothetical casino therefore will generate an incremental $10,000 per day, or approximately $300,000 per month. The same casino floor of 1,000 positions (950 traditional slots and 50 skill-based games) would now generate approximately $7.8 million per month. Assuming (based on recent market surveys) that 50 percent of skill-based game players are net new players who previously did not have an interest in slot machine games, this would reflect an increase of approximately $150,000 per month, or $1.8 million in new gaming floor revenue per year. Ask casino executives if they’d be interested in new seven-figure gaming revenues—at the same historical profit levels as slot machines—and the answer will likely be a resounding and unanimous “Yes!” Casinos have already undertaken a reduction in slot positions to match the declining market and maintain floor average. Thus, there is probably no need for most casinos to have to remove slot positions to add skill-based games. Most casinos could easily add 50 to 100 skill-based games to their floor space, thereby increasing overall yearly revenues by $7 million or more, with a majority of that being purely incremental revenue. In addition to these new gaming revenues, there will certainly be increased non-gaming revenues as patrons who would not normally visit the casino now spend on hotel, food and beverage, and other entertainment. Measuring one game against house average to optimize casino floor revenue and profitability is only one way to achieve the desired results, and given the longer-term trends, it is limiting at best. New products, such as video game gambling, attract new players, many of whom are already visiting casino properties but not gaming. Skill-based casino games offer the perfect solution to attract net new players and generate incremental revenue. Ask yourself… Would you rather have incremental new revenue, and net new players, or another slot machine?

—Blaine Graboyes is CEO of GameCo, Inc.

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Going Legit The double-edged sword of online gaming regulations By Steve Ruddock

lot has changed following the onset of legal, regulated online gambling in the United States. One of the most noticeable changes from the players’ perspective occurs at their first point of contact, at registration, where they are suddenly confronted with a number of hoops to jump through just to create an account. This is a far cry from the days when all online gambling in the U.S. was based offshore, and regulations and oversight were missing in action. In this quasi-legal environment, players became accustomed to lax policies, and registering online gaming accounts under what amounted to the honor system. Checks were either cursory or completely nonexistent, as players were simply asked to fill in their name and address (truthfully or not in some cases), and check the box indicating they were over the age of 18. In legal markets, they must now submit to a comprehensive identity check that includes divulging their Social Security number, and crosschecking identities against databases and credit bureaus. In addition to their identities, their devices must also be laid bare free from IP masking or VPNs, so geolocation service providers can pinpoint their location beyond a reasonable doubt. In legal markets—New Jersey, Nevada and Delaware—you’d better be who you say you are, and where you say you are, or you’re not going to be able to play.

The Alternative Isn’t An Option

making sure they were. The regulatory bodies that were issuing these sites their licenses did little in the way of real oversight or due diligence. This wasn’t about consumer protections and providing oversight; this was about the issuance of a piece of paper and a seal that gave the website an air of legitimacy. Amid this backdrop, creating an account was a quick and easy process, but one rife with fraud and abuse. The lax regulations did little to prevent underage access or curb multi-accounting. Worse, internal controls and audits were also on the honor system, which meant customers were given zero protection from unscrupulous operators, some of whom mismanaged and/or outright stole player funds. So, even though players may be frustrated with the hoops they must now jump through in order to create an online account with a licensed operator, it’s still light years better than worrying if your money is going to disappear overnight, if the games are on the level, or if your personal information will be sold on the black market.

That’s All I Can Stands; I Can’t Stands No More Calls for legalization and real regulation are nothing new. Some online poker players and advocates had been pleading for legalization and regulation of the industry long before the April 15, 2011—a day that has become known in poker circles as Black Friday—Department of Justice crackdown on online poker operators, when every online poker player in the country realized there were zero controls in place and their money was at risk. Before Black Friday there were already multiple cheating scandals,

Online gaming sites operating in the United States had been (and in some cases still are) knowingly operating in what could be labeled at best a gray market. This didn’t matter much, since the sites were located in far-flung locales, largely beyond the reach of U.S. auPokerStars saved players at thorities, and were more or less self-regulated Full Tilt $150 million in (or unregulated). funds when PokerStars Some did things the right way, but othbought its former rival ers did not, and there was nobody capable of 36

Global Gaming Business MAY 2017

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Application forms for legal iGaming in the U.S. usually run multiple pages

and dozens of instances of online gaming sites shuttering their virtual doors and taking whatever money was left with them, while their customers were left with no recourse and no way to petition for their lost money. What made Black Friday different was its scope, as it impacted virtually every online poker player in the United States and put hundreds of millions of dollars of player funds in jeopardy. Full Tilt Poker players were the hardest hit, as players were owed in the neighborhood of $150 million—money that would have almost certainly been lost forever if PokerStars hadn’t bought its longtime rival with a portion of the sale price designated for account balance refunds. What made the situation at Full Tilt so concerning was the site was seen as one of the companies doing things the right way. In the end, the legitimacy of the site turned out to be the proverbial house of cards, and Full Tilt was no better than Lock Poker or any other site that used player account balances for operational expenses, and in the case of Full Tilt, to pay shareholder dividends. The Full Tilt debacle acted as a clarion call for legalization and real regulations. After coming so close to losing $150 million, suddenly everyone wanted to see the industry legalized and properly regulated, since there was no real way to know if a company was on the up and up.

A Shortcut To Legalization Legal, regulated online gaming in the United States wouldn’t take long. Just months after Black Friday, the legalization ball began to roll, thanks to the DOJ and a query by state lotteries. In September 2011, the Department of Justice Office of Legal Counsel issued an opinion stemming from an inquiry from New York and Illinois regarding their ability to sell lottery tickets online in state. The opinion, which limited the scope of the 1961 Wire Act to sports betting, not only green-lighted intrastate online lottery, it also expressly allowed states to legalize and regulate online gambling within their borders. For advocates who had long dreamed of legal online gaming, and the players still reeling from Black Friday (and still wondering if they’d ever

see their Full Tilt Poker money), this was a major victory. It was seen as the beginning of the end of customers falling victim to unscrupulous unregulated online gaming sites. Nevada, Delaware and New Jersey moved quickly, and by the end of 2013 licensed, regulated online gaming sites were available to residents in those three states—unfortunately, further legalization efforts have stalled, and the remainder of the Unites States is still at the mercy of the unregulated industry that continues to go deeper and deeper underground.

No Margin for Error But players quickly discovered effective regulation of online gambling requires policies and safeguards with real teeth, regulations that required players to make a tradeoff, and give up some of the convenience the offshore unregulated sites provided. In fact, U.S. players soon discovered the verification processes in place were far more rigorous than in any other regulated online gaming market. The reason Nevada, Delaware and New Jersey went above and beyond was because online gambling continues to be a point of contention in the United States, with groups and individuals ready to pounce on any negative headlines. So, when New Jersey, Nevada and Delaware were crafting regulations to oversee their forthcoming online gaming industries, they did so under the assumption that there was zero margin for error. They had to get it right, and getting it right meant robust regulations that err on the side of caution. In practice, this led to: • Player verification checks that are every bit as intrusive as an application for a credit card, an auto loan, or to open a bank account. • Comprehensive geolocation checks that treat any suspect or missing information as a breach. • Licensing all third-party vendors—player verification, geolocation and payment processing companies.

MAY 2017 www.ggbmagazine.com

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Like a financial institution, casinos must record a person’s name, address and SSN whenever an account is opened.

They Are Who We Thought They Were When it comes to player and geolocation verification, the primary questions that need to be answered are, who is accessing the platform and where are they accessing it from? But in order to get to that point, ID and geolocation verification providers need to ensure there aren’t missing pieces of information, or anything the customer may be trying to hide. When it comes to verifying a player, Matthew Katz, the CEO of CAMS—one of the companies tasked with verifying players for legal online gaming sites—once explained the process as akin to answering the six questions familiar to every reporter: the who, what, where, when, why, and how. Who is accessing the site? What information might they be trying to hide? Where are they accessing the site from? Is there anything suspicious when they connect? Why are they accessing the site? And finally, how are they trying to gain access? These questions are answered by cross-referencing the submitted data, including your Social Security number, with age verification databases, ID verification sources, credit bureaus, phone verification services, credit card credential management services and any other available data. For most people, everything will line up perfectly, and they’ll swiftly be approved for play. For others, with inaccurate or incomplete data, the verification check can go down one of two roads, and they can be: • outright denied; or, • left in a state of limbo pending the submission of additional documents proving the person’s identity.

bases, not to mention that it’s also required by law under the Bank Secrecy Act and Patriot Act, since casinos are subject to the same anti-money laundering protocols as banks. Like a financial institution, casinos must record a person’s name, address and SSN whenever an account is opened. Because of its importance, it’s also a piece of information U.S. residents have been conditioned to guard, and unsurprisingly, it’s one of the first drop-off points for registering players, as Borgata CEO Tom Ballance said at a 2014 online poker hearing in California, when he noted the SSN request was the leading dropoff point, but far from the only one.

When it comes to player and geolocation verification, the primary questions that need to be answered are, who is accessing the platform and Trivial Mistakes where are they are Still Mistakes My own firsthand experience is a perfect example of accessing it from?

The Uncomfortable But Necessary Question The invasiveness of these checks, and the decision to err on the side of caution, is a double-edged sword. Yes, they improve the efficacy of thwarting underage access and/or out-of-state access, but at the same time, the process can be frustrating for people not trying to game the system, and for the skeptical among us, the need to divulge their Social Security number is often a bridge too far. A Social Security number is the central piece of the puzzle that verification companies use to cross-reference the prospective customer in data-

Global Gaming Business MAY 2017

how stringent the verification process can be. Soon after the industry launched, I registered an online poker account at one of New Jersey’s licensed sites—you can register and fund an account outside of New Jersey, but you cannot play unless you’re located inside the state’s borders. I filled in the information requested fully and honestly, so it was a bit unnerving to see that my account had been flagged and prompted to contact customer support to sort it out. Why was my account flagged? Apparently, I entered my name as Steve instead of Steven—the latter being how it’s written on my Social Security card. This trivial oversight was enough for the site to flag my account and request that I call customer service in order to make sure I really was who I claimed to be, which meant I had to jump through a few more hoops. On the one hand, this type of rigorous oversight is a breath of fresh air compared to the dozens of offshore accounts I’ve registered at over the years. It makes it difficult for anyone to game the system, and it instills confidence that the regulations are working. That being said, it’s easy to see how it creates a second drop-off point. Put in the same situation, many would-be players would be reticent to call customer support, since they entered all information properly. It’s easy to envision someone becoming frustrated with the whole process and simply closing the window and moving on to some other activity.

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Online Betting Considered in Several States

An effort that seemed full speed ahead a few years ago appears to have run out of steam. In part, the reason is that PokerStars, the largest poker website in the world, has turned its attention elsewhere. PokerStars has been part of a coalition that included several gaming tribes, including the Morongo Band and the San Manuel Band, plus the Hawaiian Gardens Casino, Commerce Casino and Bicycle Casino card clubs. Because of PokerStars’ brush with the U.S. Justice Department over its alleged violations of U.S. law, several other gaming tribes have strenuously opposed it being allowed to participate in California online gaming. They believed that when PokerStars allowed U.S. citizens to play on its offshore sites that it built up a customer list that would be very hard for newcomers to compete against. This would create an uneven playing field from the get-go, they argue. This created an impasse, with those opposed to PokerStars unable to push through a bill that excluded them, and those who want to work with PokerStars also unable to power through a bill that included them. This year PokerStars saw one of its allies, the Bicycle, badly wounded when state and federal law enforcement shut it down for a day due to an investigation of money laundering at the casino. This can’t help but taint PokerStars’ efforts.

“It won’t be in the final he march toward iGaming budget, I don’t believe, because continued in several states in there are people opposed to it the U.S. last month. who are higher than me and West Virginia has become don’t want it in the budget,” the eighth state to introduce onPretlow said. “They want to do it line gambling legislation this separately and want to look at it year, but one that was considered more fully.” a possibility has been backed In Massachusetts, an ad hoc down. commission tasked by the legislaThe West Virginia bill would ture with recommending an om“authorize internet gaming man- New York Assemblyman nibus bill that would encompass aged and licensed through existing Gary Pretlow all possible forms of online gamauthorized gaming facilities” in the ing except the lottery is close to releasing its findstate. The state Lottery Commission would regings. It has been studying the issue since last year. ulate the online sites. The commission was created last year after the According to the bill, “Developments in issue of daily fantasy sports (DFS) rose to promitechnology and recent legal decisions have crenence. Lawmakers legalized and assigned regulaated an opportunity to legalize interactive poker tions to DFS on a temporary basis, but part of the as a means to further enhance and complement bill created the commission, which has until this the benefits delivered by casino gaming and lisummer to make its report. The nine-member censed facilities to or for the benefit of the comcommission includes legislators, industry experts munities in which they operate.” U.S. Governors Express and appointees from the governor, attorney genUnder the proposed legislation, licensed eral and gaming commission. It has conducted gaming facilities and racetracks would pay Concerns on Federal Online several hearings. $50,000 for a license fee plus a 14 percent tax on Gambling Interference The Massachusetts Gaming Commission, gross gaming revenue. In addition, operators whose chairman Stephen Crosby serves on the legwould have to verify that participants are at least he National Governor’s Association has sent a islative commission, has said repeatedly that legal21 years old and that participants are located in letter to U.S. Attorney General Jeff Sessions izing online gaming would help the Bay State to the state or a permissible jurisdiction. Also, operbasically telling him to leave decisions on online regulate and tax existing websites and burnish the ators’ and players’ funds would have to be kept gaming to the states. state’s reputation as a technology leader. separately. Policies would have to be established Sessions, in his confirmation hearings, said he He recently told lawmakers that online gamto identify and combat cheating, and gaming might be willing to reassess a 2011 opinion from bling technology “could become another modest protocols would have to be set to minimize the Department of Justice that allowed online gambut real economic engine.” He added, “Whether problem gambling. bling in individual states. online gaming will come to dominate In New York, hopes are dimming that the The governor’s group— the overall gaming industry remains regulation of online poker will be fast-tracked which is vice-chaired by Neto be seen, but it’s certainly a signifithrough the state legislature, says one of the invada Governor Brian cant part of the industry. It’s already dustry’s principal backers in Albany. Sandoval, one of three states here.” Assemblyman Gary Pretlow, whose legalizato allow online gambling— And finally, California seems tion bill appears to be stalled in the lower house, strongly urged Sessions to stay ready to disappoint again. A bill legaltold internet news site Online Poker Report that out of a state matter. izing iPoker has run into several obassembly leaders are not convinced poker in its “The nation’s governors stacles. California Nations Indian web iteration offers enough of a skill component are concerned with legislative Gaming Association Chairman Steve to evade the state’s requirement that any expanor administrative actions that Stallings puts the chances of a successsion of gambling beyond lotteries, horse racing would ban online internet ful bill coming out of the legislature at and casinos must be approved by constitutional gaming and internet lottery less than 50-50. Attorney General Jeff Sessions amendment.

Global Gaming Business MAY 2017

GlobalGam

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sales,” the letter said. “The regulation of gaming has historically been addressed by the states. While individual governors have different views about offering gaming—in a variety of forms— within their own states, we agree that decisions at the federal level that affect state regulatory authority should not be made unilaterally without state input. A strong, cooperative relationship between the states and federal government is vital to best serve the interests of all citizens.” Sessions made his comments under questioning from Senator Lindsey Graham, who has introduced the Restore America’s Wire Act bill, which would ban all online gambling in the country. The bill comes from Las Vegas Sands owner Sheldon Adelson, who has been personally backing a move to ban all online gambling. However, many analysts feel that addressing online gambling would be very low on Sessions’ priority lists, especially as President Donald Trump—a former casino owner—has not significantly weighed in on the issue.

Brexit Gibraltar Battle Raises Online Gambling Industry Fears

s the U.K. and Spain battle over Gibraltar in Brexit negotiations, the online gaming industry based on the small territory is left waiting to see the outcome. Brexit negotiating guidelines published by the European Union said that no Brexit agreement between the E.U. and U.K. could apply to Gibraltar without agreement between Spain and the U.K. That led U.K. officials to say they will defend their interests in Gibraltar, with some

Gibraltar

even invoking the country’s defense of the Faulkland Islands in the 1980s. British Prime Minister Theresa May said that she would “never” allow Gibraltar to slip from British control against the wishes of Gibraltarians. Gibraltar’s gambling industry employs about 3,000 people, with another 1,000 indirectly depending on the sector for employment, according to a report in the Racing Post. Many of the employees live on the Spanish side of the border. The territory has attracted many online gaming companies due to its low tax rate. While the U.K. and Spain are being contentious, bookmakers in the territory are trying to stay above the fray. “I think the hyperbole has gotten a bit out of hand, and when things go into proper negotiations it will be handled sensitively on both sides, but obviously, it’s something we continue to monitor,” William Hill Director of Communications Ciaran O’Brien told the Post. In the meantime, Spain has said it will not close its border with Gibraltar after the U.K. leaves the E.U.

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25 years later, ‘Mississippi Miracle’ confronting competitive realities By Dave Palermo

t was termed the “Mississippi Miracle,” and it began 25 years ago, when state legislators allowed floating casinos along rivers and coastal counties in the Magnolia State, an industry that would ignite an explosion of jobs, taxes and economic development. From the once-sleepy Gulf Coast, up the lazy river delta to dirt-poor Tunica County, nearly 30 casinos—most with hotels—jump-started a dormant economy, winning nearly $3 billion a year, creating 17,000 jobs and generating $300 million annually in state and local taxes. “We had no clue how big it would be,” Chevis Swetman, president of the Peoples Bank of Biloxi, says of a statewide gambling industry that quickly rose to No. 3 in the nation, trailing only Nevada and Atlantic City. “It was such an exciting time,” says Mary Cracchiolo Spain, director of public relations for MGM Resorts Mississippi. “It was like a loaded freight train barreling down the tracks. “There were suddenly jobs. There were things to do.” The Mississippi market remains strong. Revenues from 12 Gulf Coast casinos increased $124 billion over the last three years to a near pre-recession peak of $1.3 billion. Optimism abounds even in upstate Tunica County, where annual revenues have fallen to $600 million, roughly half what the region was winning a decade ago. “We still are a viable market—$600 million is nothing to sneeze at,” says Webster Franklin, president and CEO of Tunica Convention & Visitors Authority. But the state’s casino industry is not nearly as viable as it was 25 years ago. And the freight train of excitement has slowed, considerably.

Global Gaming Business MAY 2017

Confronting Competition Except for the three-year jump in Coast revenues—helped along by the December 2015 opening of the Scarlet Pearl resort in D’Iberville— statewide casino win has been declining for more than a decade. Casinos last year won $2.1 billion, according to Mississippi Gaming Commission figures, a long fall from the $2.9 billion they won in 2007. The downward spiral continued this year with the February casino win at $172 million, 10 percent below the same month in 2016, according to the state Revenue Department. With increasing competition in surrounding states, there appears no end to the revenue decline. And the industry is confronted with a myriad of challenges—some market-driven, some political and a few courtesy of Mother Nature. Mississippi had a near monopoly on casino gambling in the Southeast United States when the industry was launched in the early 1990s. But the gambling landscape has changed dramatically. Operators today are competing with new and expanding commercial and American Indian casino markets in Florida, Alabama, Arkansas, Oklahoma and elsewhere. Natural and man-made disasters—the Mississippi River flood of 2011, Hurricane Katrina in 2005 and the Deepwater Horizon (also referred to as the BP) oil spill of 2010—plagued the industry at both ends of the state. The threat of more hurricanes in the South and flooding in the North discourage potential investments. And, perhaps most important, legislators from Mississippi’s Bible Belt remain staunchly opposed to gambling within their borders.

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Chevis Swetman and Peoples Bank were movers and shakers in the early days of Mississippi gaming MGM Park, adjacent to the Beau Rivage, is host to minor league baseball

Tunica, Coast Seeking Help Economists believe air traffic and tax and regulatory incentives are necessary to help casino companies in Tunica and along the Coast confront the growing competition. But efforts to get legislative help from Jackson may prove futile. MGM and Harrah’s (now Casesars Entertainment) for nearly a decade subsidized low-cost carrier Air Tran’s flights in and out of Gulfport-Biloxi International Airport, a partnership that ended with Katrina and the recession. Many are looking to the state legislature to fill the void, helping incentivize air traffic needed to enhance the Coast as a destination resort. Up north, state business leaders are suggesting legislators let Tunica casino operators move on land, plying them with tax incentives to reinvest in their properties and, perhaps, move closer to historic Route 61, known as the “Blues Highway.” But few are confident they can get legislators to sign onto any bill aiding the gaming industry. Lawmakers reacting to the devastation of Hurricane Katrina passed a bill permitting casinos to move inland within 800 feet of the median tide, legislation intended to discourage companies from abandoning their operations. “After Katrina, there were thousands of people whose jobs were dependent on our doing something,” says Bobby Moak, a longtime legislator and current Democratic Party chairman. “We had to do it for the industry. We had to do it for the economy.” The Katrina legislation—credited with saving 10,000 jobs and millions of dollars in taxes—passed by only two votes, barely surviving the wrath of antigambling Bible-thumpers. “It was a very contentious vote,” Moak recalls. “Several legislators gave up their political careers to vote for it. Four or five didn’t make it back.” The closeness of the Katrina vote does not bode well for gambling industry officials seeking a helping hand from the state Capitol. “There are people in North Mississippi religiously opposed to what goes on here,” says Spain, who oversees public relations for MGM’s Beau Rivage on the Coast and Gold Strike hotel-casino in Tunica County. “They don’t care. They simply do not care.” “Something has got to be done, particularly in the Tunica market,” says Larry Gregory, executive director of the Mississippi Gaming & Hospitality Association. “We’re going to have to look at Katrina as our model as we look up north,” Gregory says, noting not only the tidelands legislation but the billions of dollars in federal and state aid and tax incentives that flowed to the region

after Katrina and the BP spill. “That action has paid the state back,” he says of the Katrina vote. “It was a good investment.” “Government can be a player with the industry,” Moak says. “It can provide tax incentives for gaming companies putting money back into their projects and growing their footprint. “But gaming along with tobacco and liquor is treated like a sin industry. The state has to treat the industry like everybody else.” The Mississippi Economic Council (MEC) plans to solicit a study on gambling public policy, likely from one of the state universities, in an effort to open a dialogue on how lawmakers can work with and assist gambling as a tool for economic growth, tourism, jobs and taxes. “We need to look at how we can position this industry to continue to be successful, because it’s proven to be a big driver of the state economy,” MEC President Blake Wilson says. “We’ve got a ton of non-gaming businesses that benefit and serve the gaming industry, just as is the case with an auto plant or ship-building, other mainstay industries in our state. “The gaming tax revenue going to the General Fund is a good chunk of money,” Wilson says, “and it’s needed.”

The Mississippi River floods of 2011 closed Tunica casinos for months and began a decline that continues to this day

MAY 2017 www.ggbmagazine.com

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“We have to differentiate what we’re offering because gaming has proliferated. Products evolve. This is a different market than it was 25 years ago.” —Mary Cracchiolo Spain, Director of Public Relations, MGM Resorts Mississippi

A Once-Ideal Economic Model One of the first states to legalize commercial casinos, Mississippi was the perfect model for a gambling industry, drawing 60 percent to 70 percent of its revenue from surrounding states. Lawmakers levied a relatively small 12 percent state and local tax rate and imposed a laissez-faire regulatory system modeled after that of Nevada. Rather than recycling existing local revenue with small-market “convenience” gambling, regulators required developers to build non-gambling infrastructure—preferably hotels—creating a network of visitor destinations. Floating casinos eventually lined the state’s northern, eastern and southern borders, leaving the inland Bible Belt free of gambling, save for the Mississippi Band of Choctaw Indians, operators of the Silver Star and Golden Moon resorts on reservation land near Philadelphia. Poverty-stricken Tunica County captured the Memphis, Tennessee, and Midwest markets. Resorts along the white-sand Coast beaches lured visitors from Alabama, Florida and Louisiana. Seven casinos in Vicksburg, Natchez and Greenville comprise a central Mississippi River market targeting local communities, geographically insulated from outside competition. The Gulf Coast, with its history of bootlegging, illegal gambling and 24-hour nightclubs, had long been a regional destination, but commercial fishing, oil and tourism in the 1970s fell on hard times. Construction of Interstate 10 diverted traffic from once-bustling coastal Highway 90. “The conventional wisdom was those folks were going to hell anyway, so why not let them have gambling?” Moak quips. Regional gambling competition developed with passage of the Indian Gaming Regulatory Act (IGRA) of 1988 and the spread of commercial casinos in Illinois, Indiana, Iowa, Missouri and elsewhere. The Seminole Tribe of Florida expanded gambling operations and the Poarch Band of Creek Indians built three hotel-casinos in Alabama. Visitation from Florida, Alabama and Georgia has fallen 1.1 million since 2013, according to the Mississippi Gaming & Hospitality Association. Tunica County visitation fell dramatically—and to some degree permanently—when the flood of 2011 forced closure of its 10 casinos for nearly a month, diverting nearby gamblers to Southland Park Racing and Gaming in West Memphis, Arkansas. “That day-trip market out of Memphis to Tunica during the flood gave trial to Southland,” Franklin says. “Southland very smartly reinvested money they were making during that time and upgraded their product. The games got better—or more comparable—to what we offer. “Our properties reopened, but a large portion of our market found it easier or more convenient to go across the river to Southland.” The region suffered another major blow in 2014 when Harrah’s Casino Tunica closed its resort and convention facility, putting 1,300 people out of work. 44

Global Gaming Business MAY 2017

Shared Interests Fearing competition from Louisiana and Florida, Nevada casino companies initially avoided building on the Coast, preferring the more secure Tunica County market south of Memphis. Casino development in south Mississippi was spearheaded by firstgeneration companies such as Grand Casinos and CEO Lyle Berman, Casino Magic and founder Marlin Torguson, Isle of Capri and Chairman Bernard Goldstein, Treasure Bay and CEO Bernie Burkholder and President Casino and owner John Connelly. Mirage Resorts (later acquired by MGM), Harrah’s/Caesars, Imperial Palace and Boyd Gaming later bought into the Coast market. For nearly a decade, the legacy operators in Tunica constituted the bulwark of the Mississippi gambling industry. “Tunica, in the early days, was a huge success,” Gregory recalls. Declining revenue, industry consolidation, investment opportunities elsewhere and threats of flooding have left operators cool to the market. Some properties desperately need upgrades. “If you’re a publicly traded company, you have a fiduciary responsibility to your stockholders to make money, to increase the value of your stock,” says Allen Godfrey, executive director of the Mississippi Gaming Commission. “If I’m in management with one of those properties up there, it would be hard to sell investing in an area that is not growing, but declining in business. “They had a great market going into 2007, 2008. Then they had the recession. It wasn’t long after that—two, three years—that they had the flood of 2011. Then there was an expansion of gaming. “It’s been a struggle for Tunica. Whatever could happen did happen.”

Interest Remains on the Coast There continues to be developer interest in the Coast, Godfrey says, which has “six to eight” sites approved by state regulators awaiting project proposals. “We’re looking at more growth, barring a major storm,” says gambling attorney Mike Cavanaugh. “I believe the market is coming back. “We’re near where we were pre-Katrina,” he says of the Coast’s $1.2 billion casino win in 2016. “Those are pretty sporty figures, in my opinion.” Potential developers include the Poarch Band of Creek Indians in Alabama and Mashantucket Pequot Tribe of Connecticut, operators of Foxwoods Casino. “I think there’s a lot of room for growth,” banker Swetman says. “What is being debated is, how do we grow it?” There is plenty of gambling, hotel rooms, entertainment, fishing, golfing, seafood restaurants and bars along some 26 miles of white-sand beach, stretching from Biloxi to Waveland.

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The former Isle of Capri is now the Golden Nugget Biloxi

The state, city of Biloxi and MGM collaborated to build a minorleague baseball field to house the Mississippi Shuckers, an affiliate of the Milwaukee Brewers. And the family-friendly Margaritaville Resort and water park recently opened for business on Biloxi Beach. An aquarium is planned in Gulfport, and the Beauvoir, onetime residence of Confederate President Jefferson Davis, is a major tourist attraction. The same is true of the Ohr-Oâ&#x20AC;&#x2122;Keefe Museum in Biloxi and Walter Anderson Museum and Shearwater Pottery in Ocean Springs. The gambling industry grouses that the Coast Coliseum and Convention Center is too far from the cluster of casino hotels in East Biloxi. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve got to have a convention hotel,â&#x20AC;? Swetman says. â&#x20AC;&#x153;People donâ&#x20AC;&#x2122;t want a shuttle bus.â&#x20AC;? But the biggest beef is the lack of sufficient air traffic. Gulfport-Biloxi is serviced by Delta, American and United Airlines. But airline industry consolidation and the lack of discount carriers are obstacles to expansion of regularly scheduled air service to the Coast. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve got a lot going on with entertainment, fishing, golf and the baseball park,â&#x20AC;? Gregory says. â&#x20AC;&#x153;We just need to get more people down there. â&#x20AC;&#x153;Air service is critical.â&#x20AC;? â&#x20AC;&#x153;Everybody would agree we need more air service,â&#x20AC;? Spain says. â&#x20AC;&#x153;The challenge is there are limited gates and limited carriers. Thereâ&#x20AC;&#x2122;s competition. There are a lot of parts to that. Itâ&#x20AC;&#x2122;s very complicated.â&#x20AC;? Competing with surrounding states and sustaining business is a challenge for marketing directors. The Beau Rivage flies a Boeing 737 twice daily in and out of Gulfport-Biloxi airportâ&#x20AC;&#x201D;chartering gamblers from such locales as Rockford, Illinois; Canton, Ohio; and Knoxville, Tennesseeâ&#x20AC;&#x201D;and generating a third of the visitors to the 1,700-room beachfront resort. â&#x20AC;&#x153;We have to be creative,â&#x20AC;? Spain says. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re always looking to find new markets, try different approaches and change the mix. We have to differentiate what weâ&#x20AC;&#x2122;re offering because gaming has proliferated. Products evolve. This is a different market than it was 25 years ago. â&#x20AC;&#x153;But we continue to bring people back. Itâ&#x20AC;&#x2122;s an exciting time. Itâ&#x20AC;&#x2122;s a mature market, but weâ&#x20AC;&#x2122;ve got great facilities. We have great operators. Weâ&#x20AC;&#x2122;ve got a great destination. Thereâ&#x20AC;&#x2122;s a lot to do here. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve got the key ingredients you need to be successful,â&#x20AC;? Spain says. â&#x20AC;&#x153;We have to continue to stay on our toes and understand the forces we can and canâ&#x20AC;&#x2122;t control. Weâ&#x20AC;&#x2122;re going to do our best to keep bringing people here.â&#x20AC;?

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Vicious Cycle Casinos ‘flipped the switch’ on the Mississippi Coast

he late Mississippi House Speaker Tim Ford was booked into the Broadwater Beach Resort in Biloxi one night in 1988 when the hotel manager telephoned his room and offered to comp him dinner at Hurricane Katrina washed casino barges like the President off nearby Mary Mahoney’s Old French House Restaurant. their moorings and up onto the Coast Highway, marking a When Ford remarked that the generosity was not necessary, the manager of devastating period for Coast casinos the 450-room hotel is said to have replied, “Mr. Ford, you’re the only guest in the hotel tonight. If you eat at Mahoney’s we won’t have to open the kitchen.” Longtime resident Fred Larue, noting how barren of traffic Coastal High“Things have come full circle,” Spain says. “Now people are trying to way 90 was prior to legal gambling in the early 1990s, often quipped, “The get here.” only thing you had to worry about running into on the highway was a dog Many were wary that the gambling industry would have a negative imsleeping in the road.” pact on the Coast quality of life. Once a wild and wooly resort area with fishing, golfing, 24-hour nightclubs “We were concerned that if gambling came to the Coast, it would and even some illegal gambling, the Mississippi Gulf Coast had fallen on hard dominate our communities, socially and politically,” former Sun Herald times when legislation was enacted in 1990 to allow floating casinos on the publisher Roland Weeks says. beach. “We were fine with casino companies coming here and becoming a “We were a tourist town without the tourists,” Harrison County Supervisor part of the community. We did not want casino companies to come here Beverly Martin recalls. and make the community a part of the gambling industry.” “The hotels couldn’t pay their water bills,” says Chevis Swetman, president Weeks praised first-generation gambling companies that came to the of the Peoples Bank of Biloxi. “They couldn’t pay their power bills.” Coast—Grand Casinos, Isle of Capri, President Casino, Treasure Bay and “It was pathetic,” says Mary Cracchiolo Spain, public relations director for Casino Magic, among others—for embracing the community. MGM Resorts Mississippi. “There simply were no jobs.” “The companies that came here expressed a desire to be a part of the Despite a dismal economy and double-digit unemployment, it took two community,” he says. referendums for Harrison County, Mississippi, residents to legalize floating Disaster struck, however, with Hurricane Katrina in 2005, and ecodockside casinos in 1992, and the margin was slim. nomic momentum slowed to a crawl with the recession of 2007 and the BP But within a month, the Isle of Capri, President Casino and Biloxi Belle oil spill in 2010. An ecological calamity, the spill caused little visual damage were up and running. They grossed $121 million in five months. but frightened tourists away from the beachfront resort area. Those who worked the ballot initiative anticipated five casinos employing “We were well on our way when the storm hit,” Cavanaugh says. “The some 5,000 workers. Twelve hotel-casinos today employ about 13,000 workers. storm kicked us off our tracks. There was a brief economic boom after the “We dramatically underestimated the pent-up demand,” attorney Mike Castorm hit. Then BP hit us, and we got thrown off the tracks a little bit vanaugh says. “I had no clue.” again. “Prior to the casinos, nobody had health insurance,” Martin says. “Not only “BP was an impact more in perception than reality. There was no oil did the casino companies provide excellent benefits with health insurance, but washing up on the beach. But the rest of the country didn’t know that. other employers on the Coast had They said, ‘Oh, they got hit by an oil spill,’ and who to match their benefits so they wants to go visit an oil spill?” wouldn’t lose their workers.” “We’re having a hard time starting up again and deThere was an economic ripple veloping continual growth,” says Swetman, who slept in effect. Hotels and motels up and his downtown bank in the days following Katrina, down the coast were booked to near which destroyed his home. capacity. City and school budgets “Aside from air service, everything else is coming swelled and municipal services imalong,” Cavanaugh says. “Gaming is improving. The proved. There was entertainment, non-gaming investment is coming along. The third nightlife and more dining options. component is airline service. Land prices soared. “We need to reach a level where we are not totally de“Gaming sort of flipped the pendent on the drive-in business,” he says. The recently opened Scarlet Pearl casino in D’Iberville is just switch,” Swetman says. “We went “I’m optimistic.” one of half a dozen of new casinos that may be built on the from being a buyers’ market to a —Dave Palermo Coast as the region rebounds sellers’ market, overnight.”

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TABLE TITO

Can tickets be used in the pit? And how will it work? By Dave Bontempo

ail TITO. Gaming reveres that name, often linked with Roman emperor Titus, in a leadership context. Several years after IGT and Casino Data Systems reinvented the coin redemption landscape with ticket-in, ticket-out technology, upgrades reflect the impact. Vendors enhance the invention that spiked revenue and customer service via paper tickets. They have made TITO portable across the casino floor, enabling slot and table players to switch games, not currency. More hands per hour for the house. Fewer lines and game delays for patrons. It’s a great extended life for this celebrated paradigm shift. TITO ranks with mobile and online gambling, progressive jackpots, players club and video slot machines, among others, as renowned industry game-changers. It’s wise to build upon a winner. Companies outside the United States target the fertile American market. London-based TCSJohnHuxley has made TITO-equipped electronic and hybrid table games a vital part of its product lineup. Germany-based CountR GmbH has made size the issue. It developed a solution so minute it can fit at every gaming table. The company landed a big Oklahoma casino deal last year by going small. It also made employees, not players, the prime users, of a product called TITA (tickets at tables). The company reports explosive new growth in the wake of a recent full rollout. Another avenue enticed JCM Global. The Japan-headquartered company, long part of TITO with bill validators, upgraded its lineup. First it purchased the innovative FutureLogic product line. JCM subsequently targeted new casinos, successfully, with bill validators and printers that connect to the casino management system. TITO-enabled technology also enables a sporting-event wager from the comfort of a slot machine. New Jersey-based Dynamic Gaming Systems had the urge to merge. It brought the TITO, slot and table-game world into one operation. Still more outfits, like Nanoptix in Canada, unfurl new products to increase speed and decrease snags. From varied perspectives, TITO remains a catalyst for innovation.

The TITO Pathway What led to this? TITO initially brought speed and convenience to the slot floor. Since 48

Global Gaming Business MAY 2017

the early 2000s, the technology has been used in slot machines to print out a paper slip with a barcode indicating the amount of money represented. This total could be redeemed for cash at an automated kiosk. Players were able to collect winnings with a ticker rather than carry a bucket of coins. They could enjoy a restroom or restaurant break, pop their new ticket into a machine and resume gambling. The machines utilize a barcode scanner built in to the bill acceptor, a thermal ticket printer in place of a coin hopper and a network interface to communicate with a central system that tracks tickets. Advantages were significant. Hopper fills for TITO machines were eliminated. TITO also enabled ticket bonusing, coupons and drawings. Benefits outweighed the flip side.

Call It TITA “Small in,” a play on “all-in,” describes CountR’s commitment to reduced product size. The tactic brought a stateside breakthrough for the company based outside of Berlin. It addressed an important need for compressing valued space without reducing service. CountR believes that with TITO-based techniques dominating slot machine play, the next move must lower action steps for table-game players. With the TITA micro-ticket redemption device installed at a table game, casinos have flexibility. They can validate tickets and display their amount, accept tickets at a table game to be partly exchanged for chips and issue and print tickets in exchange for chips. TITA just completed a successful first operation year in Oklahoma. This product is the first GLI-approved ticket redemption system for table games, according to CountR Chief Financial Officer Dominik Winau, who co-founded the company in 2003. TITA can be retrofitted to any gaming table in any casino. It consists of an on-table device as small a cellular phone, and an under-table device with logic and a ticket printer, he asserts. Winau considers TITA a major breakthrough. “Finally, the tickets used on slots are used at tables as well, with all the comfort and cost savings that made them so successful at slots,” Winau says. “This is just one of numerous benefits to an operator using our product.” He considers the benefits abundant. Players no longer must take chips to the cage to get cash. They can take a ticket from the dealer at the table and go to the next table, slot or a ticket redemption unit. Players do not

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CountR’s TITA

leave the gaming area or get bored waiting in line at the cage. The patron can play at the table directly if he already has a ticket. The buy-in is much faster and safe, he contends. Dealers just scan the ticket, with no need to count bills. The casino can reduce personnel for fills and credits to the table and re-deploy them. TITA has two major connection modules, according to Chris Bennett, vice president of Americas for CountR. Operators can scan tickets above the table and print tickets below. The ticket printer has a 4-inch touch-screen capacity to print between 300 and 900 reports. Bennett, who has been involved in the business for three decades, considers TITA the most important product he’s seen. “Of all the products I’ve been associated with in the last 30 years, this one has the most impact,” he says. “It makes the games friendlier. The process is very simple, you have one currency running throughout the property (as opposed to chips, coins, etc.) and it is simple enough that when I visit some properties, the dealers come and shake my hand. They said the process became so easy that it has given them time to become more engaged with the customers and enjoy better tips. “It also makes the table-game atmosphere friendlier, less intimidating to people who don’t know it. People in the casinos have told me they can see a TITA at every table in the country in the next year.” Numbers support that sentiment, he believes. Bennett says that TITA, five years in the making, has 3,000 unit orders pending. That’s approximately 10 times the previous deployment. Bennett says the company waited a full year to see TITA in action before expanding. And then there’s the cage. It does not have to be used to prepare fills and

accounts for credits if the property has TITA. That reality, along with others, spearheaded an Oklahoma casino group to obtain the product last year. The 7Clans Casino properties are owned and operated by the Otoe-Missouria Development Authority, the economic branch of the Otoe-Missouria Tribe. “The main reason we were interested in the product is that it enables us to do away with the cage,” says Max Walker, table games director for the 7Clans properties. “Kiosks do so much, with jackpots, check-cashing and even cash advances. When we sit back and look, the only thing our cage was necessary for was cashing chips for table games. “It helped us eliminate the cage, which is definitely significant. The staffing levels you need to operate the cage are sizable. Even a smaller property with 250 machines and four table games needs 10-12 cashiers and perhaps four or five supervisors to

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cover a 24-hour operation.” The elimination of those positions could approach half a million dollars a year, he estimates. Walker says no jobs were lost in this move. Natural attrition had already reduced personnel. The cage removal merely prevented 7Clans from having to hire more people. “In a market where growth is harder to show, saving money like this frees up revenue via labor costs that can be shown as growth,” he says. “You are able to put a lot of money back into the tribe (by not having to spend more). We as operators remind one another every day why we do this.” Walker says TITA pays for itself in one calendar quarter.

A Fuzion of Strategy Japan-based JCM Global is a leader in innovative and award-winning automated transaction technologies and solutions. The company has three technologies that relate to TITO: Ticket2Go, GEN5 printer and Fuzion. The GEN5 printer will soon hit the market. It expands on TITO capabilities with a faster processor, enabling promotional printing and couponing. It can also print dithered graphics, enabling the printing of promotional tickets and other graphics associated with JCM’s new Fuzion technology. That includes printing lottery tickets, race and sports tickets, even tax forms, taking TITO to a new level. Companies with iVizion and GEN5 will be able to utilize Fuzion, which, among other things, connects bill validators and printers to the

casino management system. This dynamic already impacts two new locations. JCM validators and printers processed more than $72 million in the first three months at MGM National Harbor near Washington, D.C., company reports say. JCM also announced a significant contract in mid-March for 100 percent of bill validators and printers for the new Rivers Casino Resort in JCM GEN5 printer Schenectady, New York. Ticket2Go is a retrofit ticketing solution for gaming machines that don’t support open-standard ticketing protocols. It was created specifically for small to medium-sized gaming venues. It is bilingual and multi-currency, and can be deployed across an entire gaming floor. Europe, primarily the U.K., has been the main market for Ticket2Go. Operators there endorse the product because it gives players the convenience of tickets and reduces the cash float required in a non-TITO environment, JCM officials say. Fuzion, as the name suggests, combines assets. When a slot machine uses the iVizion bill validator and the new GEN5 printer, it can then utilize the new Fuzion technology. With Fuzion, each slot machine can become a multi-line profit center. It has the capability to vend and redeem lottery tickets, and to enable race and sports betting. Fuzion can also facilitate DFS wagering, the casino’s own or a third party. The product can conduct cross-enterprise promotional couponing for carded and uncarded players, along with enabling real-time currency exchange with rates that could be pre-set in real time. Finally, there’s compliance reliance. Fuzion can streamline the tax processes by printing system-generated forms and delivering required documentation to the customer while the back-end system stores signature forms and other IRS-mandated data. Fuzion was unveiled at G2E last year.

Dynamic New Trend DGS Dynamic BlackJack

A unique TITO application involves hybrid gaming. Egg Harbor Township, New Jersey-based Dynamic Gaming Systems was founded about five years ago by local casino marketing executive Charlie Barksdale. It launched a TITO-enabled breakthrough called Dynamic BlackJack, which may feature different tailored names for particular properties. Parx Casino in Pennsylvania, for instance, called it Shaq Jack, in honor of NBA great Shaquille O’Neal, in 2015. TITO is connected to the game. The bill validator and printers are at each terminal. Besides facilitating buy-ins and payouts, the system can print bonus tickets for redemption at a kiosk. This saves patrons the trouble of carting a prize around the gaming floor while they are still playing. The game itself is noteworthy, combining the privacy of a slot terminal with the shared experience of live blackjack. Dynamic BlackJack has a live dealer issuing cards to players at individual stations. Unlike traditional blackjack, newcomers need not feel intimidated by more experienced players. Serious players, in turn, don’t have to be affected by inexperi-

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enced gamblers. The player chooses one of three hands, with multiple side bet options. DGS has a 24-station setup at Parx Casino, is installing up to 16 stations for Hollywood Casino at Charles Town Races in West Virginia, and has plans for several other properties, according to Nat Holt, vice president of business development for DGS. “The blackjack gaming system technology developed at DGS uses a live dealer, live cards, TITO and player tracking,” Holt says. Holt indicates that DGS has technology for smartphones, tables and mobile apps once jurisdictions allow their use.

Gaming Floor Live Of course, TITO technology is one of the primary features in hybrid and stadium-style setups that have combined the convenience of slots with the excitement of live table games. TCSJohnHuxley, one of the leading table-game suppliers in the world, has used the TITO function to great advantage in the GFL Live module of its Gaming Floor Live product. Using compact fixed or portable touchscreen gaming terminals that enable live casino table play, GFL Gaming increases the number of player positions on the gaming floor by streaming real-time video of live table games to multiple TITO-equipped terminals. TITO, of course, is only the beginning—the Gaming Floor Live system links each electronic table game terminal to a tracking and reward system

that brings benefits like bonusing and progressives to table-game players.

Protecting the Fundamentals Sometimes, the name of the modern-day TITO game is simply improving, preparing for the next possible installation deal. Nanoptix, the Canadian-based printing company, advertises Paycheck NextGen as a cutting-edge solution. The company says it puts an end to ticket jams, half tickets, compressed and wasted tickets, spillage damage and expensive add-ons for couponing. NextGen introduces an integrated anti-jamming paper path that eliminates jamming and half tickets. It prints a ticket in less than one second, officials say. Features include a paper-low sensor on “last ticket” or more (adjustable), anti-spillage channels, easy access to a straight paper path, multiple USB ports, a MicroSD reader, Ethernet, HDMI, Bluetooth, a standard 400-ticket tray (with optional extensions to 600 or 800) and promotional couponing-ready status. Paycheck Next Gen also offers a strong polycarbonate construction for lighter weight and reduced shipping costs, and multiple bezel options for various cabinet designs. And so goes the Upgrade Parade. TITO, especially at tables, remains a stellar growth option. It provides ease and convenience, two words that never grow old in a demanding consumer climate. No wonder casino officials verbally salute it.

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OPERATIONS

The Holistic View Communication drives a culture change in casinos

ou can’t help but wonder how much better casinos could be doing if each department understood the true value of the property’s guests and aligned their strategies around maximizing that value. It’s not for lack of innovation in the gaming industry. There are more slick back-office systems and new revenue centers on properties than ever. Technology is not the primary obstacle to running a more profitable casino. Culture is. It seems like every day one department is making a decision that undercuts another team’s approach, whether it’s casino hosts over-comping on the gaming floor, the front desk providing upgrades to low-rated players or marketing teams getting overzealous with discounted promotions. So much for “integrated resorts.” We’ve been talking for a decade now about the new-look casino that can take advantage of nightclubs and golf courses as much as the gaming floor. But we still struggle to actually coordinate operations among different departments that make up an integrated property. The lack of communication will only hurt casinos further. Much of this is due to the fact that, at many casinos across the country, departments still work in silos without a proper operating structure that encourages collaboration and communication. This old-school culture still permeates the backof-house at many casinos. The result is different groups operating independently, not on the same page with the resort’s overall strategy. Too often the value of the guest gets lost in translation. Would the front-desk clerks give up that last remaining suite if they understood how valuable it could be to have it open when a whale walks in at the end of the night expecting to get that room? No. But it’s not their fault that they don’t know any better. It might not even be their manager’s fault, if she wasn’t invited to the weekly revenue meeting with the heads of the casino, marketing, sales and other departments. Catering to your diverse group of guests cannot be done in isolation. Operating a casino today requires bringing in a variety of decisionmakers to collaborate on a property-wide ap-

Global Gaming Business MAY 2017

By Marco Benvenuti

proach. Compensation and bonus structures must be aligned across the entire resort—and no longer tilted overwhelmingly in favor of the gaming floor. If revenue and profitability across all channels are important (and they are), that vision and strategy must be communicated from the CEO down to the front-desk clerk.

STUMBLING BLOCKS As an example, casino management and hotel management are often in contention over room blocks and discounting, and the struggle often leads to poor strategizing and missed opportunities to drive profit. Some operators still use blocks, essentially allocating the casino manager one-third of the hotel rooms for upcoming weekends. An employee will physically block 300 rooms in the PMS for the casino, then a week before arrival the casino manager can release the rooms if they don’t sell. Each department promotes, markets, sells and comps their various targets, but rarely do they come together to discuss an overall revenue strategy. Even if the casino floor is where you make the most money, the hotel and other departments are playing critical roles in getting those gamblers in the door in the first place. Different roles within your company—including marketing, distribution, operations, revenue management, F&B, hotel and gaming—each touches the guest at a different point along their journey and therefore has the ability to personalize the experience and optimize revenue opportunities. Particularly important is a synergy between revenue management and marketing. When the two are in sync, offers and comp decisions are made in a more strategic manner. The reality is many casinos today are still operating integrated resorts with the same approach they had 20 years ago. To truly connect with the guest across multiple touch points, representatives from all departments need a seat at the table.

THE EVOLVING CASINO LANDSCAPE Casinos that don’t bring their various departments

together to collaborate on marketing and revenue strategies could be in for a rude awakening. Gaming revenues are slipping at casinos across the country, and more operators are looking for ways to monetize other parts of the business: food and beverage, meeting space, spa and other amenities. At the same time, younger casino-goers are looking for different experiences and may not even be gambling at all. Instead, they’re coming to resorts for the food, the pool experience, nightlife, the spa, etc. With so much attention still focused on the gaming floor, other guest touch points—including the hotel rooms—can be treated as an afterthought. This often leads to different departments developing and embarking on their own strategies. Even departments that touch guest revenue are left in the dark on how the operation is doing, and very rarely does management share insight on upcoming demand and its impact on operations. Most detrimental is the divide between hotel and casino operations. Because hotels want to drive revenue and casino hosts have the ability to discount or comp players, it often leads to a struggle between the two. Unfortunately, casino and hotel managers do not often share goals and incentives. When casino and hotel teams can work side by side and in conjunction with sales and marketing, strategies will be more effective and common goals will be shared. There’s no silver bullet out there that creates this kind of teamwork immediately. Everybody has to be committed to that one common vision over the long haul, and casino leaders need to establish a new culture to get that buy-in. As co-founder and chief analytics and product officer, Marco Benvenuti guides Duetto’s product vision, direction and implementation. Prior to Duetto, Benvenuti was executive director at Wynn and Encore resorts in Las Vegas, where he founded and managed the Enterprise Strategy Group, leading revenue management, data analytics, direct marketing and online channels.

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17th Annual

Nominations are open for the gaming industry’s most prestigious awards. The GGB Gaming & Technology Awards are the casino industry’s most prestigious awards for technology, products and services. The honors are designed to recognize and encourage innovation and technology in the rapidly changing casino industry. Winners will be announced in the November 2017 issue of Global Gaming Business magazine and awards will be presented at Global Gaming Expo (G2E), October 3-5, 2017 in Las Vegas. DEADLINE: August 18, 2017

• Best Consumer-Service Technology • Best Productivity-Enhancement Technology • Best Slot Product • Best Table-Game Product or Innovation

Nominations are now open in the following 4 categories:

All Non-Slot Product nominations will also automatically be nominated for the “Progressive Products” feature in GGB’s 2017 G2E Preview magazine. Slot products will be featured in the October issue of GGB, distributed at G2E.

www.ggbmagazine.com

For details and to enter online visit:

John Buyachek • Sales Director jbchek@ggbmagazine.com 702-248-1565 ext. 227

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EMERGING LEADERS On A Mission Jordan Seager Vice President of Marketing, Lucky Dragon Hotel & Casino hen Jordan Seager learned Mandarin as a missionary in Taiwan, he had no idea that knowledge would help land him an executive position at the Lucky Dragon Hotel & Casino, Las Vegas’ first Asian-centric casino resort. But it did. “Without being able to speak Chinese, I would probably be teaching business at a high school here in Las Vegas and coaching volleyball. So yes, the language has been a big factor in my career,” Seager says. He believes the two years he spent as a missionary also propelled his career, beyond learning the language. “I speak with team “Though they might seem like polar opposites, without my time in Taiwan I know I wouldn’t be anywhere close members on the front to where I am today,” he says. “My mission taught me line who know what is how to work hard. Likewise, I believe my background is happening better than unique.” anyone else. I meet Seager’s entry into the casino industry started as a with management, fluke. He just returned home from Taiwan and took an vendors, partners and internship at Station Casinos with another missionary. “I knew nothing about the industry, and if I am guests to learn how to being honest, I didn’t even know what position I was apimprove every aspect plying for.” of our business.” Still in college at the time, Seager joined Station as an analyst, a position he held for three years. “It was the perfect role for me to begin in the industry, because I learned the business and financial side first,” he says. Overall, Seager worked at 11 positions in nine years with Station Casinos in all facets of the business—including as an Asian host—which helped lead to his dream role as vice president of marketing for Lucky Dragon last May. At Lucky Dragon, Seager spends half his week learning the good and bad about what is going on in the business. “I speak with team members on the front line who know what is happening better than anyone else. I meet with management, vendors, partners and guests to learn how to improve every aspect of our business.” The other half of his time is spent analyzing the business, the financials, the deals, the database and such. “I meet with my team to create new ways to grow profits while improving guest satisfaction. The last half (yes, I know that’s three halves) is what my wife, Brittany, calls ‘my second job,’ which is the time I spend on the phone while I am away from the property.” Like many casino executives, the father of three has his share of influencers. But for Seager, his dad, Brian, has been his biggest mentor. “If you spoke to anyone that knows him, he is honestly the best guy in the world. I talk to him almost daily about every topic in the world, and I love him first as a father and second as my guide to becoming a better man, husband, father, leader and friend.” Seager’s advice to those entering the business: “Find what you like and what you are better at than most people, and work your tail off doing that. And learn Chinese.” —William Sokolic

Global Gaming Business MAY 2017

Emerging Technologies Excitement Itay Fisher Chief Information Officer, William Hill Online s newly appointed chief information officer at William Hill Online, Itay Fisher is front and center on the exciting frontier of online gaming through the use of new gaming technologies. Fisher’s career has mirrored the industry’s path of emerging technologies over the last decade, culminating with his new assignment. The position at William Hill Online is a natural fit for Fisher, given his career investment in developing the varied technologies applied in online wagering today. William Hill Online features Fisher as the company’s online front and center, offering online wagering in a growing number of jurisdictions. The core business continues to revolve around sports betting in the U.K., which comprises nearly 50 percent of the company’s revenue. But revenue growth can be seen in the company’s popular “Vegas” platform, and in casino, bingo and other new games. Fisher is certain to address opportunities in the growing use of mobile technologies in online betting. Born and educated in Israel, Fisher has been in an environment custom-made to foster technological innovation, which he has leveraged handily. Fisher received a bachelor’s degree in computer science in 2004, followed by an executive MBA in 2009, both from the University of Haifa. The value of this combination between technical and business education is obvious. This direction was cultivated between 2008 and 2013 as Fisher, at the urging of a friend working at Playtech, joined the company and traversed roles in gaming technology’s epicenter. As a program manager for Playtech, he also managed the company’s E2E rollout of a product portfolio including poker, casino games, mobile gaming and bingo in the Italian market. While at Playtech, Fisher headed the U.K. projects team, and was accountable for the delivery of programs and projects for Playtech’s

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“Having the ability to create new games and develop at a company’s own pace has proven to work successfully in the gaming industry.”

Platinum licensees such as Betfair, Paddy Power, Netplay and Ladbrokes. According to Fisher, the atmosphere at Playtech “was always great, as a young company with licensees standing in line to get to the company’s products and technology. One project followed another, with new products launched on a weekly basis.” Fisher’s last role at Playtech was program director for the Gala Coral Group, where he was responsible for platform migration, which added corporate operating experience to his skill set. Soon after completing the migration, Fisher joined Gala Cora Group as the product and technology director, where he served from June 2013 to December 2016, accountable for desktop, tablet and mobile product development across the gaming brands. During his time at Gala Coral, Fisher has shifted the development strategy from thirdparty development dependency into the inhouse development powerhouse in order to

accelerate innovation, reduce time to market and improve the quality of the products. On the convergence of traditional and internet gaming, Fisher notes, “In the last two years, we have seen more and more consolidation, which I expect to continue as companies are looking to become more cost-effective. I also see more and more companies moving development in-house to increase innovation and differentiate themselves from competitors. Having the ability to create new games and develop at a company’s own pace has proven to work successfully in the gaming industry.” Although ambitiously engaged in his career, Fisher finds time to travel and spend valuable time with family and friends. Although a sports enthusiast as a teenager and a runner today, Fisher’s most recent challenge was climbing Kilimanjaro in Tanzania, one of his “best experiences ever.” —Michael Soll, President, The Innovation Group

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TABLE GAMES

Escaping Vigorish Speeding up the game by eliminating the speed bump By Roger Snow

o vig or not to vig. That is the question. Whether ‘tis wiser in the pit to suffer the coins and calculations of outrageous fortune—WTF is 5 percent of $2,375, anyway?—or to take up lammers and collect them later? Talk about a sea of troubles. And by opposition what, stop the practice altogether and lose money? Ay, there’s the rub. Whether or not casinos should continue charging a vig (or a “tax” or a “commission”) on certain bets in certain games is indeed the question. The answer, however, comes not courtesy of Shakespeare’s Crown Prince of Denmark but rather Mattel’s 8-Ball of Magic: “Outlook not so good.” Scour the world and you’ll find a handful of games that deduct commission from some or all winning bets: 1) baccarat; 2) pai gow poker; 3) pai gow tiles; 4) three-card baccarat; and 5) fan tan. OK, to be honest, you really had to do some serious scouring the find the last two, but hey, they’re out there. You just have to know where to look. And then be willing to go there. Which we were. And we did. And lived to tell about it. Over the next two months, we will dig into each of these games—two now, three in May— and explain how to best remove commission from them, if such is your desire. But before shoveling the first scoop of dirt out of the ground, let’s clear a little underbrush out of the way. The truth is that nobody likes commission. Nobody. Not the customers, who occasionally find themselves in disputes over its accumulation; not the dealers, who constantly find themselves calculating 19/20ths of any amount they can count; and most definitely not the casinos, who invariably find themselves looking for ways to speed up game play, not grind it. To. A. Halt. Commission endures not because people think it’s good and wholesome and fun; rather, because of the understandable unwillingness to fix what appears to be working just fine, thank you

Global Gaming Business MAY 2017

very much. Gamblers play the hell out of these games—well, the hell out of baccarat and pai gow poker, anyway—so why monkey around? But maybe, just maybe, the slow pace of change is about to change.

BACCARAT By far the most popular game in the commission club, with 10,000 tables around the world, and growing. And growing and growing and growing. Everyone thinks baccarat comes from Asia, but it actually comes from Italy. So, basically, it’s the opposite of spaghetti. In the standard, commissioned version, casinos take back 5 percent of all winning Banker bets. Necessity is the mother of this convention: The game’s drawing rules favor Banker over Player 46 percent to 45 percent, with ties accounting for the rest. If casinos didn’t collect a toll on Banker wins, that’s all people would bet on. And then, faster than you can count from 0 to 9, the table would hemorrhage all its chips out of the rack. The most widely used version of commission-free baccarat takes one specific event— Banker winning with a three-card total of seven points—and makes it a push. The second-most widely used version takes another specific event—Banker winning with a point total of six—and pays it 1 to 2. While both methodologies result in similar house advantages, the former is considerably faster.

PAI GOW POKER Though not a juggernaut in the class of baccarat, pai gow poker—the slow game with the funny name—is hardly a lightweight. Instead, it’s one of the most popular poker-based titles in the history of table games. And also unlike baccarat—or pai gow tiles, three-card baccarat and fan tan—this is not a game with an overwhelming Asian clientele. It’s much more Occidental than Oriental: it’s poker-based; it’s from Southern California; it’s played almost exclusively in the United States

and Canada. You would be hard pressed to find a single table in a single casino in Macau, Singapore or Malaysia, or anywhere in the Far East, come to think of it. Casinos typically employ two countermeasures to create a house advantage on pai gow poker: they win ties; and they charge players 5 percent commission when they beat the dealer. Combined, these yield a mathematical edge of about 2.6 percent. Because pai gow poker’s earning power is already handicapped by its leisurely pace and propensity for pushes, when casinos stop charging commission, they typically start doing something else. They have to reclaim that lost edge back, right? Yes, with the notable exception of Washington state, where custom dictates not charging commission nor implementing some new rule to goose up the house edge. In other words, geographical proximity notwithstanding, if you’re going to play pai gow poker, the Pacific Northwest and its 1.5 percent house advantage is like literally your best bet. There’s good news if you don’t operate a casino in the state of Washington and you don’t want to continue charging commission. You’ve got options. Lots and lots of options: If the dealer’s entire seven-card hand contains less than a pair, all player bets win 1 to 2; if the player’s entire seven-card hand is Queenhigh, all player bets push; if the dealer has a Joker in his hand, all player bets push; when the dealer’s two-card hand is 9-high, all player bets push; when the dealer yawns and checks his watch twice in a 10-minute interval, all bets made by left-handed players with red hair lose half their bets. Hey, just seeing if you’re paying attention. To be continued . . . Roger Snow is a senior vice president with Scientific Games. The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of Scientific Games Corporation or its affiliates.

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NEW GAME REVIEW by Frank Legato

Dragon Fury Konami Gaming

his is one of Konami’s featured games on the new Concerto Crescent cabinet, the manufacturer’s new format featuring a 43-inch, curved vertical LCD monitor. Like other Konami video slots in what’s called the Concerto Collection, the cabinet also features sleek black design, signature holographic lighting, and games on the slot-maker’s KP-3+ video platform. Dragon Fury is designed to maximize the effect of the Concerto Crescent. The game is in the company’s trademark “MultipleLines 7-8-8-8-7” configuration—seven symbols on each of the outer two reels; eight symbols on each of the inner three. The oversized reels fill up most of the cabinet’s super-sized portrait monitor, and the increased jackpot symbols permit this particular game to be offered to casinos in 80-line or 120-line versions, with one betting unit activating two paylines. In the primary game, wild symbols appear on the second through fifth reels, substituting for all but the orb scatter symbol.

Each wild symbol occupies two consecutive positions on the same reel. The orb symbols appear on the three middle reels, and trigger one of four “Orb Free Game” features. One or two orb symbols can appear on each reel. Three scattered orbs trigger the Green Orb feature; four orbs, the Blue Orb; five symbols, the Yellow Orb; and six symbols, the Red Orb. Each triggers eight free games, but the orb color determines the number of top-paying dragon symbols added to the reels for the free-spin round. A maximum of 241 dragon symbols can be added to the possible freespin results for triggering the feature with six orb symbols. Dragon Fury can also be configured to include a mystery-trigger, twolevel standalone progressive jackpot. Manufacturer: Konami Gaming Platform: Concerto Crescent Format: Five-reel, 80-line or 120-line video slot Denomination: .01, .02, .05, .10, .25, .50, 1.00, 2.00, 5.00 Max Bet: 320 Top Award: 200 times two-line bet Hit Frequency: 48% Theoretical Hold: 4%-18%

French Quarter 7s AGS

rench Quarter 7s is a classic single-line, three-reel slot game on the sleek AGS Icon video cabinet. The New Orleans French Quarter theme plays out through bright colors on the reel symbols and the top-screen LCD monitor, and through a background of jazz music during the reel spins. The base game is offered in the dollar denomination in the manner of an old multiplier-style reel slot—bets of three, six, nine, 12 or 15 credits per spin, with corresponding multiplied jackpots. There are frequent wilds applied to classic slot symbols including cherries, bars and several different-colored 7s. The top jackpot of 5,000 credits times the multiplier is returned for three wild symbols. Elsewhere in the pay table, the primary game always returns the top possible jackpot—for instance, two wild symbols and a cherry on the payline would return the prize for two wilds, because it is larger than the pay for three cherries. The top-screen bonus is a mystery event, potentially triggered by any three-symbol win. A large Multiplier Wheel appears on the top monitor, with values of 1X, 2X, 5X and

Global Gaming Business MAY 2017

10X. The player is randomly awarded from one to five spins of the wheel, with the value of each added to the total Win Multiplier after the spin. When all spins are complete, the accumulated multiplier, from 2X to 25X, is multiplied by the value of the triggering win. According to the manufacturer, the first spin of the Multiplier Wheel is guaranteed to result in at least 2X, so the win on the triggering spin is always guaranteed to be improved by the bonus. Manufacturer: AGS Platform: ICON Format: Three-reel, single-line video slot Denomination: 1.00 Max Bet: 15 Top Award: 5,000 times bet multiplier Hit Frequency: 17.8%-18.53% Theoretical Hold: 5.08%-9.03%

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Pharaoh’s Run Novomatic Americas

his new game on Novomatic’s Dominator Curve cabinet features a multi-level bonus event centered around a search for gems in an Egyptian pharaoh’s tomb. The base game is a five-reel, 50-line video slot, with stacked symbols and scrolling wilds occurring randomly. The bonus event offers a package of special features in which the player can achieve up to five levels. The event, called the Treasure Runner Bonus, is triggered with three scattered bonus symbols. The display depicts a maze of passages through the pharaoh’s tomb, and the player selects a path—the Sapphire, Ruby or Emerald path. The idea is for the player to navigate the path, picking up gems of the chosen color along the way while avoiding obstacles like giant scorpions, mauling mummies and ground-swallowing hazards, which end the bonus. As the player successfully navigates each level, gem credits are awarded and the next tomb level is unlocked. Successfully completing the top three levels awards the three corresponding progressives—the Sphinx jackpot, resetting at $10; the Obelisk resetting at $50; and the Pyramid, resetting at $500. The bonus ends after the fifth level is completed, barring any game-ending hazards.

Manufacturer: Novomatic Americas Platform: Dominator Curve Format: Five-reel, 50-line video slot Denomination: .01 Max Bet: 250 Top Award: 500 times line bet Hit Frequency: Approximately 33% Theoretical Hold: 6%-14%

Shark Attack Everi

his new game on Everi’s marquee-style Core HDX cabinet features secondscreen picking and free-spin bonus events in a colorful underwater theme. The base game is a five-reel, 40-line video slot featuring mystery “Chomp Wilds” added to results after random spins, triggered when a shark swims across the reels to eat fish, turning from three to 10 random reel positions wild. Bonus symbols scattered on reels 3, 4 and 5 trigger the Shark Hunt Bonus, in which the screen switches to a grid of symbols for a picking game. The bonus initially awards five picks, which reveal credit prizes, Shark symbols, Sonar symbols or Fish Bucket symbols. Finding a Great White Shark symbol awards the lowest paytable pier, but the player advances to a higher tier with each Great White Shark symbol found. The Sonar symbol awards two or three extra picks. A Fish Bucket symbols attracts four wild shark symbols to the grid and

awards an extra pick. Three or more Free Spin symbols scattered on the reels trigger the Save Me Free Spins Bonus. Three Free Spin symbols award seven spins at a 120X bet multiplier. Four Free Spin symbols award 10 spins at a 160X bet multiplier. Five Free Spin symbols award 12 free spins at a 200X bet multiplier. In the free spins, the Surfboard Wild symbol becomes a “sticky wild.” Once it lands, it remains in position for the remainder of the free spins. Manufacturer: Everi Holdings Platform: Core HDX Format: Five-reel, 40-line video slot Denomination: .01, .02, .03, .05, .10, .25, .50, 1.00 Max Bet: 400 Top Award: 1,388,900 credits Hit Frequency: 39.72%-45.82% Theoretical Hold: 2%-15%

MAY 2017 www.ggbmagazine.com

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CUTTING EDGE by Frank Legato

Reinvestment Reinvented Product: Personalized Loyalty Pricing Manufacturer: Duetto

he time of simple loyalty marketing in the gaming industry is long gone. So are the days when a casino’s staff could use a “gut feeling” to offer guests a comp or casino rate, based only on the information coming from the gaming floor. Duetto has rolled out Personalized Loyalty Pricing, a feature in its GameChanger application, to let casinos incorporate dynamic data sources and predictive analytics into their reinvestment decisions and direct-marketing programs. Instead of offering only points or a static discount off the transient rate, casinos can offer their customers more instant gratification in the way of a unique discount on hotel rooms. Personalized Loyalty Pricing is different from old-school reinvestment and rewards programs in a few important ways. First, the feature is part of Duetto’s GameChanger application that optimizes casinos’ transient room rates across all booking dates and room types, according to demand and changing dynamically. It uses total customer worth data that includes more than just ADT from gaming, including spending on property for food and beverage, spas, golf and entertainment. Reinvestment rates can also be flexed by guest segment and booking date.

Because all those factors can be modified within the GameChanger application by stay date or by segment, the system calculates an unlimited number of “casino rates” between a comp and the full cost of a room that a property could offer to a guest. Comps are still reserved for the highest-value guests, and other spenders are still rewarded for their contribution to the casino’s profitability. As revenue from rooms and non-gaming sources continues to drive the top line at casinos where gaming revenue has stalled, managers and marketers can continue to grow profits with insights into consumer demand and more targeted pricing strategies. For more information, visit DuettoResearch.com.

Smart Signage Product: Intelligent-M Manufacturer: Optec Displays, Inc.

alifornia-based Optec Displays, Inc. engineered the visually dynamic, cuttingedge Intelligent-M specifically for applications requiring the ultimate in LED display technology. The Intelligent-M provides a complete solution for visualization in outdoor environments, such as on highway billboards, spectacular-size displays on casino buildings’ exteriors or Las Vegas-style signs on tribal land. A bezel-free design maximizes the visual display area and creates clean, seamless displays, easily blending modules into existing structures. The display module combines a slim, elegant design with the ultimate in picture quality. Intelligent-M is innovative and technologically advanced, offering superior image quality, while reducing installation time, downtime, and setup and maintenance costs. Modules can fit together directly, both vertically and horizontally, offering increased flexibility in shape and size, guaranteeing

Global Gaming Business MAY 2017

seamless scalability. Additionally, the Intelligent-M is an ultra-high bright, lightweight, smart LED module with all-weather performance. Optec’s software management program, which can be integrated into existing systems, allows for central content management, while maintaining the ability to send locally specific information to each location and/or each sign. Intelligent-M boards can be uniquely incorporated into the design of the facility, and are as important to the aesthetics of the building as they are to its operations. The signs operate with a range of illumination, brighter during the daytime and dimmable at night. Because of its durable construction, long life span and energy efficiency, Intelligent-M is a sustainable exterior communication solution for the gaming industry. For more information, visit optecdisplays.com.

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FRANKLY SPEAKING by Frank Legato

The Bunny Problem the Facebook page “Bunnies Matter in Vegas Too,” are doing the natural, humane act—they’re feeding them. Volunteers travel to all the dump sites around town with food and water. You know, I’m no expert, but it doesn’t seem to me that feeding animals will lead to a drop in the feral population. Clark County Animal Control reportedly has no desire to round up the animals, so I guess there’s only one alternative... Shhhh... be very quiet. I’m hunting for wabbits! Hehehe... Oh, don’t write letters. I’m kidding. Besides, I’m pretty sure it’s Duck Season, not Wabbit Season. Speaking of rampantly reproducing rodents, did you ever wonder what happened to Jon Gosselin, the former co-star of the TLC reality show Jon & Kate Plus 8? As you’ll recall, that was the show featuring the travails of a couple that evidently took industrial-strength fertility drugs and produced a litter of eight babies. The reality show placed bright lights and cameras in the Gosselins’ home to follow the couple along as they tore their hair out trying to take care of a gaggle of drooling babies. It was canceled after the Gosselins got divorced. It was followed by the short-lived Kate Plus 8, which drew criticism about now-single-mom Kate exploiting her children. That show was canceled too, I think because some of the kids were shaving by then. Well, Jon Gosselin has apparently resurfaced at Caesars Atlantic City. He has joined the “Untamed Male Review” at the Dusk Nightclub, as a stripper. His first show was slated for April 1, and it just goes to show that if you’re a celebrity, casinos will eventually find something for you to do. I’m guessing the now-buff Gosselin will soon have himself another mate, and another reality show. Before you know it, as Vegas deals with its feral rabbit problem, Atlantic City will be dealing with feral Gosselins. Hey, maybe Jon can move to Vegas. “Tune into TLC for Jon & Kate Plus 2,700 Bunnies!” Now, that’s entertainment. VIC TOR RINAL DO

alking down the Las Vegas Strip on Easter Sunday, you might not have been surprised to see a chubby figure wearing bunny ears and a fuzzy coat. It goes with the season. On the Fourth of July, it’s not unusual to encounter several Uncle Sams along the Strip. On Elvis Presley’s birthday in January, people sometimes have to wade through crowds of sideburned, jump-suited revelers, all saying “Thangya. Thangya very much.” In December, I’ve encountered numerous drunken Santas in the gaming capital. Once, a Santa with a bald head and a tambourine wished me a “Merry Krishna.” But this Easter, not everyone in bunny ears was a stubble-bearded reveler with a basket of eggs and a quart of hooch. A lot of those bunny-eared figures were... well, bunnies. You may not have heard, but Las Vegas has a bunny problem. Feral bunnies are all over the place, reportedly the result of people buying pet rabbits, finding out they’re too hard to take care of, and deciding to “set them free.” The problem in doing that is there are no remote farms or lush woodlands in Vegas into which the bunnies can be released to romp for the remainder of their happy lives. They essentially become urban homeless with floppy ears. But they don’t sleep under bridges or panhandle. (“Hey, brother... Spare carrot?”) They do what wascally wabbits do. They make more wascally wabbits. And more. And more. It’s only a matter of time before they develop Brooklyn accents and start asking, “What’s up, Doc?” Or worse, start biting the heads off tourists like the killer rabbits in Monty Python and the Holy Grail. (“Run away! Run away!”) According to the website bunniesmatter.org (seriously), a female rabbit can produce a dozen babies every month. In two years, one pregnant rabbit can become 2,700 rabbits. You can take it from there. OK, maybe they’re not overtaking the buffets yet, or jostling for position on Strip sidewalks with the slimeball “pornslappers” sticking cards in your face as you walk. (“Hot bunnies! All nationalities!”) But they’re certainly on the golf courses (usually in foursomes), in the landscaping, in parks and on a few traffic islands. According to the the website, at a large state mental hospital that is one of several “bunny dump sites,” fights have broken out among the bunnies, I’m guessing after political arguments. Not really. Evidently, it’s more a territorial thing, like bunny gangstas protecting their turf. To deal with the problem, animal rights activists and other concerned citizens like those who created the Bunnies Matter website, and

MAY 2017 www.ggbmagazine.com

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Innovation Beta streamlined testing program. CanGOODS&SERVICES nonbeard’s Treasure is a fast-paced game of cards,

ARUZE OFFERS PERFORMANCE GUARANTEES

as Vegas-based slot supplier Aruze Gaming America announced it is instituting a two-year performance guarantee on its APX video platforms, as well as all other new video platforms going forward. “Leading the way, Aruze will now offer this first-of-its-kind performance guarantee on all new orders of APX and any new video platforms going forward at no cost to the customer,” the company said in a press release. The new policy was introduced at the 2017 National Indian Gaming Association’s Indian Gaming Tradeshow & Convention last month. “Aruze has some of the best game designers in the industry, and is proud to stand behind our products,” said Eric Persson, general manager and senior advisor of product development. “When you purchase hardware from us, we see it as the beginning of a relationship, and we want our customers to be 100 percent happy. We believe it’s the right thing to do.”

GAMBLIT GAMES EARNING WELL IN NEVADA FIELD TRIAL

he CEO of Gamblit Gaming, Eric MeyerEric Meyerhofer hofer, reports that early returns are positive for its Cannonbeard’s Treasure and Gamblit Poker, the first skill-based gaming machines to be introduced in Nevada, currently in field trial at Planet Hollywood Casino on the Las Vegas Strip. The field trial began March 30 under Nevada’s 62

Global Gaming Business MAY 2017

skill and naval warfare. Players build a hand by grabbing the cards needed and reaching an objective first to win a chest of gold. Gamblit Poker is a head-to-head poker competition involving two to four players. Meyerhofer told the Las Vegas Review-Journal that the skill games have an average play time of around 45 minutes, with players remaining at the game for hours at a time. He told the newspaper the games are appealing to a young demographic. “Things are going great,” he said. “The people were younger. I saw some great crowd enthusiasm. People were fist-bumping even when they were losing, which is a great sign. I saw a lot of families playing and people sitting for an hour and a half jawing with each other. “The big thing to know is ‘Are we finding new dollars? Are we growing the market?’” he said. “And it looks like we are skewing younger.”

VIZEXPLORER PARTNERS WITH OPENWAGER ON SOCIAL GAMES CONTENT

izExplorer, which provides operational intelligence solutions for the gaming industry, has announced a partnership with social gaming provider OpenWager. The deal allows the company to launch VizExplorer’s SocialLink for OpenWager on its existing applications, which allows gambling companies to introduce online social games to boost customer visits, the company said. The OpenWager platform will be integrated with VizExplorer’s marketing tool, campaignViz, which can track players’ cross-channel behavior and allow for tailored promotional offers. Later, the platform will be integrated with VizExplorer’s slot optimization tool floorViz and its sales enablement solution, hostVizOps. The integrations will give casinos additional tools for player analysis, allowing them to adequately trace on-property activity and adjust their marketing offers and player development strategies accordingly.

TAHOE BILTMORE PICKS KONAMI SYNKROS

onami Gaming, Inc. announced that its awardwinning Synkros gaming enterprise management system has been selected by Tahoe Biltmore Lodge & Casino, a Northern Nevada resort property in the town of Crystal Bay. Featuring more than 200 casino slots and table games, Tahoe Biltmore is the first property on Lake Tahoe to introduce Konami’s leading systems advancements. With Synkros’ enhanced promotional

capabilities and targeted rewards, Tahoe Biltmore players are connected with real-time offers and incentives that are most relevant to their entertainment preferences.

GAMECO SIGNS STAR TREK LICENSING DEAL

ameCo, Inc., the startup supplier that introduced skill gaming to the industry in New Jersey last fall with its Video Game Gambling Machines (VGMs), has signed a licensing deal with CBS Consumer Products under which the company will produce games for the VGM based on the iconic Star Trek television series. The deal gives GameCo access to the entire Star Trek television franchise including the original and all the sequels—The Next Generation, Voyager, Enterprise, Discovery and Deep Space Nine. The latter will be the first to be released in fall of this year, when the company releases Star Trek Deep Space Nine Adventure on the VGM. According to the company, the game will enable players to “take lead of the USS Defiant and battle their way to victory in immersive ship-toship combat.” The game will feature highly polished 3D models of the iconic spacecraft that will attract fans of both Star Trek and the space combat genre alike. The deal was brokered by Richmond Management Group.

AGS ORION A HIT

pril was the nationwide launch month for the new Orion slot cabinet from supplier AGS, but the company reports that the games placed so far in around 50 U.S. casinos are performing at four times the house average. In an interview with CDC Gaming Reports, AGS Vice President of Slot Products Andrew Burke said the early returns on the cabinet are twice what was anticipated. “We didn’t reinvent the wheel, but the packaging has made a big difference,” he said. The cabinet, which accompanies the standard Icon

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cabinet in the manufacturer’s game library, has already won awards as one of the most innovative products of the year. It features a 42-inch marquee-style vertical LCD monitor surrounded by 500 game-controlled LED lights. “When you’re walking through the casino, they’re going to catch your attention,” Burke said. Among Orion’s inaugural suite of games are Fu Nan Fu Nu, Wolf Queen and River Dragons. The company shipped around 250 Orion machines to markets across the country on April 28 to start the launch, followed by another 250 machines this summer.

EVERI SHARES UP AFTER DEBT ANNOUNCEMENT

hares of slot machine and financial services provider Everi Holdings rose after the announcement that the company will refinance two major loans. The debt refinancing could yield interest savings on its respective $462 million and $335 million credit notes and extend their maturity schedules until 2020 and 2021, increasing the company’s cash flow and improving its leverage position. The company also announced preliminary first-quarter earnings of $233 million to $238 million in net revenues, a quarterly net loss of $6 million to $4 million and adjusted EBITDA of $52 million to $54 million. Markets reacted positively to the announcement of the restructuring, with Everi shares closing on April 10 at $5.85 after opening at $5.06.

NOVOMATIC LOGS RECORD REVENUES

ustrian gaming operator and supplier Novomatic AG saw revenues from its global operations rise to a record €2.3 billion, an all-time high for the 36-year-old company and a 10 percent jump from the previous year. The supplier also reported that its workforce has risen to more than 23,500 globally. According to the company’s annual financial report, published on the ÖKB (Österreichische Kontrollbank) website, the Novomatic AG Group’s increase was achieved in the area of gaming machine revenues, which rose by €126.7 million to €1,028.9 million. Group EBITDA came to €588.5 million (2015: €616.7 million). The number of employees in the Novomatic Group grew by 18.1 percent last year, to a total of 23,849. The growth dynamics of the Novomatic AG Group is also demonstrated by the fact that the number of fully consolidated companies in the financial year 2016 increased to 217 (2015: 188). MAY 2017 www.ggbmagazine.com

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PEOPLE AGS APPOINTS REBACK EXECUTIVE VICE PRESIDENT

as Vegas-based slot manufacturer AGS announced that gaming industry executive Matt Reback has joined the company as executive vice president. Reback will lead AGS’ slot product operations, inMatt Reback cluding product management, production and service, as well as the company’s growing interactive division. Reback was most recently the vice president of marketing for Konami Gaming. Prior to Konami, Reback served in multiple executive positions for Station Casinos as well as Caesars Entertainment. He received a juris doctorate from the University of San Diego School of Law. Reback will report directly to David Lopez, president and CEO, with a focused effort on strengthening the company’s product operations to strategically align output with the growing product demand in the marketplace.

GMA’S GALAVIZ JOINS TRUMP ADMINISTRATION

onathan Galaviz of Global Market Advisors LLC (GMA) has joined the Trump administration as special adviser to the U.S. Department of State. Galaviz until February was a chief strategist with Jonathan Galaviz GMA. Last year Galaviz served as a campaign media surrogate and was an adviser to the campaign on engaging with Hispanic voters. Steve Gallaway, managing partner at GMA, commented, “Jonathan has been a valuable asset to GMA through his intellect, strategic counsel and savvy political insights. We look forward to welcoming back Jonathan to GMA after he completes his service with the Trump administration.”

NEW PRESIDENT AT RESORTS WORLD NYC

enting Americas has appointed Scott Molina as president of Resorts World Casino New York City, the company’s U.S. flagship. Molina has been with the property since

2011, joining as part of the opening team then moving into a number of executive roles, including director of slot operations, vice president of slot operations and, most recently, chief operating officer. Scott Molina In his new role, he will oversee all operations at the Queens, New York, racino, one of the largest in the country, with more than 5,500 machine games and electronic table games. A 30-year industry veteran, Molina previously served as executive director of slot operations at Trump Taj Mahal in Atlantic City. He has also led the opening of a number of casinos across the country.

industry veteran, Olson will oversee five Kewadin casinos owned and operated by the Sault Ste. Marie Tribe of Chippewa Indians in Sault Ste. Marie, St. Ignace, Manistique, Christmas and Hessel in Michigan’s Upper Peninsula. Olson has served more than 20 years in executive leadership positions in Native American gaming operations, from managing single-casino properties to casinos with hotels, golf courses and other amenities. For a decade, he was chief executive officer at Grand Traverse Resort and Spa near Traverse City and general manager of the Odawa Casino Resort in Petoskey. Besides Michigan, Olson has been licensed by tribes in North Dakota, South Dakota, Idaho and New Mexico.

NEW BOSS AT THE PALMS

tation Casinos has named Anthony Faranca vice president and general manager of its recently acquired Palms Casino Resort in Las Vegas. Faranca, who also heads the Executive Committee of Anthony Faranca the 1,200-room off-Strip casino, will be responsible for all day-to-day operations, including gaming, marketing, hotel and resort operations, food and beverage and finance. He joined the company in January from Parx Casino in Bensalem, Pennsylvania, where he served as general manager. Prior to that, he spent nine years with Parx parent Greenwood Racing. A mechanical engineer by training, the Philadelphia native began his gaming career as a customer service manager for Harrah’s Atlantic City and Showboat Atlantic City and rose through the Caesars Entertainment ranks to become regional vice president of casino marketing for all four Caesars Atlantic City properties.

OLSON NAMED KEWADIN CHIEF EXECUTIVE

ollowing a nationwide search, the Kewadin Gaming Authority has named Ron Olson chief executive officer of Kewadin Casinos. A 25-year gaming

Ron Olson

WYNN MACAU APPOINTS SINATRA im Marie Sinatra, who joined Wynn Resorts Ltd. in 2004 as senior vice president and general counsel, has been appointed a non-executive director of the U.S. company’s Asian subsidiary, Wynn Macau Kim Sinatra Ltd., for a three-year term effective April 1. Sinatra has served as executive vice president and secretary of the Las Vegas firm since 2006.

GGB

May 2017 Index of Advertisers

AGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 AGEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39,64 Agilysys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 AGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Ainsworth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Aristocrat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Aruze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 CountR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 DiTronics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Everi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Fabicash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 Fantini Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 G&T Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 G2E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 GameCo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Gaming Support . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 GGB Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . .12 GLI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Greenberg Traurig . . . . . . . . . . . . . . . . . . . . . . . . . . .23 IGT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Incredible Technologies . . . . . . . . . . . . . . . . . . . . . . .41 Interblock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 JCM Global . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 Konami Gaming . . . . . . . . . . . . . . . . . . . . . .Back Cover Merkur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 National Council of Legislators from Gaming States .55 Rymax Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Scientific Games . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 TransAct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

MAY 2017 www.ggbmagazine.com

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CASINO COMMUNICATIONS

Andrew Cardno Founder and Chief Technology Officer, VizExplorer

t’s not a stretch to call Andrew Cardno a “visionary” for the gaming industry. Cardno was one of the first to realize the possibility for data that casinos have collected for a couple of decades now. He says the depth of this information makes the gaming industry a leader in the data analytics field. As chief technology officer and founder of VizExplorer, Cardno has created many different programs and platforms the casinos can use to improve their fiscal performance on the gaming floor. He spoke to GGB Publisher Roger Gros from his offices in San Diego in March. For a full podcast of the interview, visit GGBMagazine.com. GGB: For many years, casinos were very in touch with their players. They knew who their players were, they had VIP and casino hosts, and direct mail that was very successful. But a lot has changed over the past decade. How do analytics help in knowing the player? Andrew Cardno: The way the industry has adapted to analytics is something that we all should be proud of. We’re a leading industry in analytics. It always brings me back to one of my good friends, a GM at a casino in Tunica, who told me that we’re like this collection of small businesses. We’ve got food and beverage, we’ve got hotel, of course we’ve got gaming, and we’ve got different kinds of gaming. And that drives a need to be able to be fully informed about our customers. The industry has a greater need to bring data together in real time than any other industry I know of. If you don’t have a complete picture of your player, you’re not giving that customer the right kind of service. Tell us about how VizExplorer came to be. What was the inspiration?

When I founded the company, I set out with a goal of never having to build another data 66

Global Gaming Business MAY 2017

warehouse again, and it’s a bit of a joke, because it’s what I was doing for many years. But to leverage the technology platforms that are out there, to bring together all the data in real time, we developed our integration hub that allows that data to come together and to be used to its greatest gaming optimization. So, we used the data infrastructure we put in place, for this one application. We proved the value of having that real-time data, of having all the data about gaming machines, so I could understand what games people like. Or, how are my preferences for games changing? We just solved one of the hardest questions that I’ve worked on in gaming, which is: If I bring a new game onto the floor, taking out participation and all the other costs associated with it, what is the incremental revenue from that game—how much of it is truly incremental to the casino? We’ve solved the math behind that, and we’re really proud of it. Do you provide any information to help casinos make those decisions about what slots to add or remove and where to place the machines on the floor?

Absolutely. At one point, I won a Smithsonian Laureate for Heroism in Information Technology for slot floor optimization. And that was even before I understood how important the customer was. We kind of have this joke at VizExplorer, in the data science team, that we keep learning new math models, and then inventing even better ones through replacement, but at the core of understanding how to do that is the customer. So, we used to analyze gaming machines based on theoretical win per day, or actual win per day, or handle pulls, or some other metric that was a measure of the performance of the game. And it worked really well. But we were mostly under-supplied and there was plenty of opportunity for growth in the industry. It wasn’t that difficult.

So, what changed?

Well, in today’s world, we’re mostly oversupplied. So, no longer can you optimize your games in that way; it just doesn’t work. Just think about the simple example of the high-limit room; it just doesn’t work to add more games in the high-limit room. So, you need to look at the floor through a different lens. And the lens that we bring forth is the lens of the customer. We do a market-basket analysis. We have an issued patent on preference filters, for analyzing the market basket in the casino. It’s one of the hardest math problems we’ve solved. So now, irrespective of the performance of the game, I’m looking at what I need to do to make my customers get the experience they need to get. So, I’m optimizing the customer experience. Very different math models. We’ve been really successful with that. It’s completely flipping analytics on its head. This is something slightly provocative, but I don’t really care about the slot winper-day metrics. We need to focus on optimizing the customer experience, that every customer gets the games they need, so it can fill out all those market baskets and optimize all those market baskets on the floor. And just to defend that a little bit, because I know some people might be a little bit agitated by me saying that, just think about video poker. It’s not the greatest-performing game on the floor, but it would be unthinkable to remove it, especially in Las Vegas. You just couldn’t remove it, because you would lose those customers. So, you have to work really hard on optimizing your video poker games, and then you go to your video reel, and your video slot, and your different types of games. It completely changes the way you look at a gaming floor, and we’ve got a deep track record of doing that.

M I NG

YEARS

R 60 YEAR

R I ENC E S

L IVERI N

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Job info None 8.375” x 11.125” 8.625” x 11.375”

Fonts Avenir LT Std (35 Light, 85 Heavy) Images Slant-crescent-ad-Flat.tif (CMYK; 406 ppi, 401 ppi; 98.32%, 99.57%), Latest Brand Logo_CMYK_8_16_13.ai (11.25%), BornFromFun_Tag. eps (134.92%), Type-lines-k30_v3.ai (40.31%), Concerto-Stack_ logo_w.eps (16.33%), Concerto-Cresecent_logo_w.eps (16.26%) Inks Cyan,

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