Global Gaming Business Magazine, January 2016 by Global Gaming Business

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GGB Global Gaming Business Magazine

January 2016 • Vol. 15 • No. 1 • $10

UK REGULATORY CHANGES IN-ROOM UPGRADES AGA vs ILLEGAL GAMBLING BY THE NUMBERS

Introducing…

Marco Sala’s New IGT

Tribal Gaming Compacts Back to the Table

People to Watch for 2016

Rise of eSports

How to avoid the DFS syndrome

Official Publication of the American Gaming Association

Association of Gaming Equipment Manufacturers

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CONTENTS Global Gaming Business Magazine

20 COVER STORY IGT 2.0

Vol. 15 • No. 1

january COLUMNS

International Game Technology CEO Marco Sala leads the newly merged end-to-end supplier into a new era, as IGT once again redefines the nature of the slot game and prepares content to please a new generation. By Frank Legato

14 AGA A Sporting Chance Geoff Freeman

16 Fantini’s Finance Peering Into 2016 Frank Fantini

74 Global Gaming Women Women to Watch Virginia McDowell

76 Table Games Big Game Hunting Roger Snow

FEATURES

DEPARTMENTS

24 People to Watch 2016

6 The Agenda

Our annual list of 25 People to Watch identifies the executives most likely to lead the industry into a new era, and a new gaming paradigm.

8 By the Numbers 9 Nutshell

By Roger Gros, Frank Legato, Dave Bontempo, Rodric J. Hurdle-Bradford, Marian Green, John Lukasik, Marjorie Preston and Steve Ruddock

12 Gaming History 18 AGEM Update

56 Compacts and California

With Aristocrat’s Sheila Bangalore, Fair Grounds’ Chris Calitri, and Scientific Games’ Rory Shanahan

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

As California lawmakers and Governor Jerry Brown seek paths to additional revenues, they look to renegotiate tribal gaming compacts—but the tribes aren’t biting. By Dave Palermo

67 Cutting Edge

Feature 50 Here Come eSports The attraction of eSports is spreading across the world, and the casino industry is no exception.

62 Regulating Britain

72 New Game Review

By Steve Ruddock

iGNA Outlook 54 We Are Getting It Wrong Anthony Cabot

55 iGames News Roundup 4

60 Emerging Leaders

Sweeping changes introduced to the U.K. gaming regulatory and compliance regime have meant operational changes for casinos. By Tony Coles and Andrew Cotton

68 In the Room Interactive television technology is changing the way casinos interact with and serve guests while they’re in the hotel room. By Dave Bontempo

Global Gaming Business JANUARY 2016

66 Frankly Speaking

78 Goods & Services 81 People 82 Casino Communications With Chris Stearns, Chairman, Washington State Gambling Commission

I I I I

s I I

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THE AGENDA

Ch-Ch-ChChanges Roger Gros, Publisher

he gaming industry has been evolving since we began publishing in 2002. Here at GGB we strive to keep you up to date and ensure you know the latest trends and developments in the industry. We think we’ve done a pretty good job at that over the years, but we’re now in the midst of a double whammy. Not only is the gaming industry changing even more rapidly than before, but so is the publication business. In this day of instant information, monthly trade magazines have to do much more than just publish the news. We’ve got to be part of your lives on a daily basis. As we enter 2016, we’re instituting several changes to GGB. Our “Dateline” section at the front of the magazine has disappeared. This was a recap of the news from the previous month, but since month-old news is really old these days, we thought we’d offer a fresher approach. So we’ve replaced the Dateline section with a rotating group of ideas that may or may not be the same each month. In January, we bring you for the first time “By the Numbers.” This page will present snapshots of studies and research that show you graphically how different segments of the industry are performing. Some great charts this month include Alan Meister’s Indian Gaming Report and the Eilers Fantini Slot Report. Later, you’ll see our “5 Questions” segment that pins down a gaming official on one of the most important topics of the day. This month, the innovative leader of GAN, Dermot Smurfit, explains the importance of social casinos to gaming operators. And in our inaugural “Gaming History” page, we try to tie events and individuals from gaming’s past into what is happening today. We go way back to the early 1950s to discuss the Kefauver Committee and how that changed gaming in the U.S. forever. As I said, these pages are just the start of the original content that we’re going to offer in the front of the magazine. If you have any ideas for this important segment or want to weigh in on what you’ve read this month, please don’t hesitate to email me. One of the reasons we discontinued Dateline was that everyone knows the news these days only

Global Gaming Business JANUARY 2015

moments after it happens. There are numerous daily newsletters, some that send “breaking news” editions when something big happens. Our contribution to more timely news is our weekly e-newsmagazine, GGBNews.com. That’s where we consolidate the week’s news, layer on original reporting, offer the weekly GGB Podcast, and some insightful opinions by members of the gaming industry. As a New Year’s gift to you, we’re offering six months of GGB News for free. Simply log on to our website (GGBNews.com), click on the “Subscribe” button and fill out all the information (no credit cards necessary). At the bottom enter the coupon code “GGB16.” Try it for free for six months and see if you don’t agree with thousands of subscribers that it’s your best source of gaming news and information on the internet. Another addition is a deal with veteran gaming executive Brooke Dunn to bring his Casino Talk online radio show to GGB. Casino Talk will be posted every two weeks and published on our GGBMagazine.com website. Don’t miss Brooke’s important guests, terrific insight and insane sense of humor. It’s a fun listen. We know that printed magazines are going the way of the dinosaur. Hopefully that will happen long after I’m gone, but in the meantime, we’re aggressively adding interactive content to our list of offerings. In addition to GGB News, we’re very active on Facebook (Global Gaming Business), Twitter (@globalgamingbiz), and LinkedIn (join our Global Gaming Business group with more than 7,000 members). Each month, you can access the digital edition of this month’s magazine, at least 10 days before you get the physical copy. Simply visit GGBMagazine.com and click on Resources & Digital Editions to do so. In the meantime, you can add GGB Magazine to your Apple or android device by clicking on Resources & Add GGB Magazine to your device—that way, we’re just a quick click away. So, lots of changes for GGB Magazine in 2016. We hope you like the changes and give us feedback and suggestions. This is going to be a great year for gaming, and we want you all along for the ride.

Vol. 15 • No. 1 • January 2016 Roger Gros, Publisher | rgros@ggbmagazine.com Frank Legato, Editor | flegato@ggbmagazine.com Monica Cooley, Art Director | cooley7@sunflower.com JohnBuyachek, Director, Sales & Marketing jbchek@ggbmagazine.com Floyd Sembler, Business Development Manager fsembler@ggbmagazine.com Becky Kingman-Gros, Chief Operating Officer bkingros@ggbmagazine.com Lisa Johnson, Communications Advisor lisa@lisajohnsoncommunications.com Columnists Anthony Cabot | Frank Fantini | Geoff Freeman Virginia McDowell | Roger Snow Contributing Editors Dave Bontempo | Tony Coles | Andrew Cotton Marian Green | Rodric J. Hurdle-Bradford John Lukasik | Dave Palermo | Marjorie Preston Robert Rossiello | Steve Ruddock Angela Slovachek | Michael Vanaskie

EDITORIAL ADVISORY BOARD Rino Armeni, President, Armeni Enterprises

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

• Julie Brinkerhoff-Jacobs, President, Lifescapes International

• Nicholas Casiello Jr., Shareholder, Fox Rothschild

• Jeffrey Compton, Publisher, CDC E-Reports

• Geoff Freeman, President & CEO, American Gaming Association

• Dean Macomber, President, Macomber International, Inc.

• Stephen Martino, Partner, Duane Morris, Baltimore

• Jim Rafferty, President, Rafferty & Associates

• Thomas Reilly, Vice President Systems Sales, Scientific Games

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

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

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

• Roy Student, President, Applied Management Strategies

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

Official Publication

Going where no slot has gone before. Yeah. We did this. We took a cuddly-yet-crass movie— that also happens to be the highest-grossing original comedy of all time— and made it interactive. Your players will love the quotes, the characters, those spinning Wonder Wheels™, and the shot at some thundering progressives.

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BY THE

NUMBERS

TRIBAL GAMInG GRoWTh ReSUMeS Revenues from tribal government gaming have declined only once— in 2009. But growth over the past five years isn’t nearly as strong as it was pre-recession.

Gaming Revenue at Indian Gaming Facilities, 1998-2013 $30,000 30000 Gaming Revenue ($ Millions)

$27.5 $26.3

$22.9

$22,500 22500 $20

$17.4 $15.1

$15,000 15000

$13.1

$9 .8 $10 .9 $8.4 $7.4 $5.4

$6.3

$3.4 $1.6

$.1

$.3

$.5

$2.5

$.7

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

PLAyeRS Love PARTIcIPATIon GAMeS IGT’s Wheel of Fortune tops the list of best-performing participation or “premium leased” games. But there are many others that are contenders.

Growth of Gaming Revenue at Indian Gaming Facilities, 2005-2013 15% 15 11.25% 11.25

14%

10%

7.5% 7.5 5%

Charts and tables courtesy of the Eilers-Fantini Slot Report. To obtain a copy of the full report, contact Ashley Hara of Fantini Research toll-free at 866-683-4357 or at ahaha@fantiniresearch.com, or Todd Eilers at tellers@eilersresearch.com or 714-769-9154.

Top-Performing Premium Leased Game Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

$28.3

$25.2

7500 $7,500

Charts courtesy of Alan Meister, Indian Gaming Industry Report, 2014 Edition. For the latest edition, visit anathaninc.com/news/indian-gamingholds-its-own-amid-slowdown-economy.

$28.1

$26.7 $26.4 $26.7

IGT/Wheel of Fortune IGT (GTech/Spielo) / Sphinx 3D SGMS (Bally) / Duo Fu Duo cai (88 Fortunes) SGMS (WMS) / Willy Wonka SGMS (WMS) / Monopoly SGMS (WMS) / Flinstones Aristocrat / Buffalo Stampede IGT / Megabucks SGMS (Bally) / Quick hit cash Wheel AGS / colossal Diamonds IGT / Ultimate X Poker Aristocrat / Batman SGMS (Bally) / Green Machine Aristocrat / The Walking Dead Multimedia / Moby Dick

Global Gaming Business JANUARY 2016

3.75% 3.75

3% 2%

2% 1%

00 -1%

-3.75

2005 2006 2007 2008 2008 2010 2011 2012 2013

Top Performing Leased Games by Quarter

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NUTSHELL CALENDAR

5Questions D

ermot Smurfit, the CEO of GAN (formerly GameAccount Network), talks about why U.S. casino operators have been slow to embrace social casinos that would allow them to stay in touch with their players when off property. To hear a full podcast of this interview, visit GGBMagazine.com.

What is the status of the casino industry completing an online transition like other industries? Traditionally, when bricks-and-mortar industries migrate online, usually you get a leader who jumps way ahead of the pack and everyone else races to catch up. We’re in the early period of that era, and I predict sometime within the next year, you’ll see one casino company jump far ahead of the pack, and the others will wonder how they did it.

1 2 3 4 5

Why can’t casinos just use Facebook for a social casino platform? It’s pretty simple: Because you never own your customer data; you only rent it. And today in the social casino market built principally on the Facebook platform, you can see that the big boys continue to get bigger and bigger, so it’s very hard for a startup casino to achieve any degree of scale, which we would express as maybe 200,000 active players a day. And even if you are successful, very quickly the competing casinos copy what made them successful using Facebook’s amazing advertising systems. It’s a great platform to advertise on, but a horrible platform to operate. Why are land-based casinos the best organizations to operate social gaming? Because of the prohibition of iGaming in the U.S. (except for a few states), it is a market that is not being served by the people who are best positioned to serve it, the land-based casinos. American casinos are very much at the heart of every regional community, and they function like a social hub. They can bring that same service to social gaming. Why haven’t casino executives capitalized on social gaming? There is a growing cohort of casino executives in America who are beginning to understand the scale of the business and the sheer quantum of money that is being spent by casino patrons when they are off property. If you appreciate the level of engagement, you have to reassert your relationship with that group and also protect the remainder who haven’t yet decided to download IGT’s DoubleDown or Aristocrat’s Heart of Vegas or one of the other social casinos available today. So, how many of today’s casino customers are playing in social casinos? We’ve seen two things. First, when a player engages in simulated gaming at home, it’s their way to prepare to come back to the casino. They play online with their local casino because they want to go visit that casino. That doesn’t mean that they’re not continuing to frequent other social casinos; they do. But we modify their behavior by reallocating their existing spend, which is typically fragmented across two or three existing social casinos, to their local land-based casino.

February 2-4: ICE Totally Gaming 2016, ExCel Centre, London. Produced by Clarion Gaming. For more information, visit ICETotallyGaming.com. February 4-8: London Affiliate Conference 2016, Olympia National, London. Produced by iGaming Business. For more information, visit londonaffiliateconference.com. February 9-11: Western Indian Gaming Conference 2016, Harrah’s Resort Southern California. Produced by the California Nations Indian Gaming Association. For more information, visit WIGC2016.com. February 22-24: World Game Protection Conference, M Resort, Las Vegas. Produced by World Game Protection Inc. For more information, visit worldgameprotection.com. March 13-16: Indian Gaming 2016, Phoenix Convention Center, Phoenix, Arizona. Produced by the National Indian Gaming Association. For more information, visit IndianGaming.org. April 5-7: iGaming North America 2016, Planet Hollywood Resort & Casino, Las Vegas. Produced by the Innovation Group, BolaVerde Media, Lewis and Roca LLP and eGamingBrokerage.com. For more information, visit iGamingNorthAmerica.com. April 27-29: GiGSE 2015, Hyatt Regency, San Francisco, California. Produced by Clarion Gaming. For more information, visit gigse.com.

“They

Said It”

“I am very concerned that anyone representing the state’s legal interests would speak out against current state law in our leading industry. At its core, this is a states’ rights issue, and I disagree with the attorney general that a federal government one-size-fits-all solution is in the best interest of Nevada.” —Nevada Governor Brian Sandoval (r.), reacting to the statement by Attorney General Adam Laxalt in support of the Restore America’s Wire Act bill, the Sheldon Adelson-supported measure to ban online gaming

“It was big hair, it was big fun, it was just very flash. It brought a new sense of razzle-dazzle to the Gold Coast, so it was a lot of fun.” —Ken Licence, Day 1 employee of Jupiters, Queensland’s first casino, which opened in 1985 and just marked its 30th year

JANUARY 2016 www.ggbmagazine.com

The Evolution of Award-Winning Technology and Proven Performance.

Meet the latest additions to the TRUE 3D® game family. Building on the success of top-performing titles like the SPHINX 3D® game, IGT’s extended TRUE 3D® game line-up takes innovation to a whole new dimension, with new Dynamic Attract Mode that invites nearby guests to sit down and play. IGT also introduces the new high-denom 3D product line, TRUE 3D Reels, which uses patented TRUE 3D technology to create engaging 3-reel games. The TRUE 3D Reels line-up launches with the most popular slot title of all-time, Wheel of Fortune®, along with the highly successful Return of the SPHINX® 3D game. Both 3D product lines are sure to evolve your floor. Contact your Account Manager to learn more.

Glasses-free 3D has never looked better. © 2015 IGT. © 2015 Califon Productions, Inc. “Wheel of Fortune” is a registered trademark of Califon Productions, Inc. All Rights Reserved. © 2015 Electronic Arts Inc. Plants vs. Zombies and PopCap are trademarks of Electronic Arts Inc. All other trademarks used herein are owned by IGT or its affiliates, may not be used without permission, and where indicated with a ®, are registered in the U.S. Patent and Trademark Office.

The Evolution of Award-Winning Technology and Proven Performance.

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GAMING HISTORY

GamblinG CraCkdowns

Tennessee Senator Estes Kefauver convened a powerful committee to uncover racketeering in America, including illegal gambling

The Kefauver hearings stopped illegal gambling dead in its tracks By Patrick Roberts

eterans of the gaming industry will remember the National Gambling Impact Study Commission, conducted by Congress in the late 1990s. The commission was set up to study gambling in the U.S. and its impact on society. The expected result, at least to the politicians who pushed for its establishment, was to crack down on the spread of legal gambling across the country and impose federal taxation. It never happened, and that’s partially a result of what gaming had learned from an earlier commission that had a much wider target: organized crime. Estes Kefauver was a soft-spoken, bespectacled senator from Tennessee. Two years into his first term, he introduced a resolution to set up a committee that would investigate labor racketeering in interstate commerce. Newspapers were full of stories in those days linking organized crime with government. Of course, gambling in those days was only legal in Nevada, where Reno was king and Las Vegas was just beginning to make its mark. But Nevada was just a blip on Kefauver’s radar. He was more interested in stopping illegal gambling in the major cities and surrounding communities. Normally, these investigations would have been a witch hunt that would have petered out after a year or less. But Kefauver was using a new communications media: television. For the first time, Americans could see the inner workings of government from their living rooms or their neighborhood bars (the sessions were even broadcast to movie theaters as they became more popular). Colorful (at least in black and white) gangsters were paraded across the screens, many of them either arguing with the committee or refusing to say a word. The dastardly deeds of these criminals were visible, more than the pulp “true crime” publications that had been popular in the ’20s and ’30s. Preceding the hearings, government investigators would swoop into the alleged gambling towns, terrorizing government officials and gambling businesses alike. The threat of having their faces on the television produced some profound changes in the illegal industry back then. Towns like Steubenville, Ohio; Covington and Newport, Kentucky; Biloxi, Mississippi; Atlantic City and Union City, New Jersey; Galveston, Texas; Hot Springs, Arkansas; and major cities like Miami, New Orleans and San Francisco all felt the wrath of the federal government for the first time over illegal gambling. Police and elected officials who had cooperated with the speakeasies and backroom casinos were suddenly and effectively eliminated as partners—and turned into adversaries. Las Vegas, ironically, got off easy. A committee stopover in the desert was interrupted only two hours in so the members could tour the Hoover Dam in Boulder City. Most of the city’s notorious mobsters/casino operators, like Mo Dalitz, were conveniently absent during the visit. Las Vegas dodged a second bullet when the committee’s recommendation to impose a 10 percent tax on legal gaming died in Congress. And soon thereafter, 12

Global Gaming Business JANUARY 2016

When Frank Costello appeared before the Kefauver Committee in 1951, he refused to let television cameras show his face, so all viewers saw where his hands

Virginia Hill was the girlfriend of Bugsy Siegel, who was long gone by the time she testified in front of the Kefauver hearing in 1951. Even still, she fled the country immediately afterwards to avoid an IRS tax evasion rap.

Nevada instituted real gaming regulations. But it wasn’t the last connection to Las Vegas. In March 1951, the committee rolled into New York at the height of its popularity. Five of seven New York television stations were broadcasting the hearing live. Head mobster Frank Costello provided dramatic testimony, but in what was probably the birth of reality television, the girlfriend of Las Vegas casino owner Benjamin “Bugsy” Siegel faced the cameras. Virginia Hill regaled the committee with tales of the “fellas” she had known, the gifts she had received and the incidents she had witnessed. It was mesmerizing, but the interest began to wind down soon after. An 11,000-page report and its recommendations were largely ignored. Kefauver lost his second bid for the presidency in 1956; his work was mostly forgotten—except in those cities where illegal gambling had been exposed. Those operations were effectively ended, and it led to the spread of legalized gambling across the country, starting with Atlantic City in 1976. So, what was once a threat to gaming actually became its champion, as it brought the industry from out of the shadows and into the light. The NGISC hearings in the ’90s were far less dramatic and focused on facts, not fantastic stories. Legal gaming was proven to be an asset to America. All lessons learned from the quiet Tennessee senator.

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AMERICAN GAMING ASSOCIATION

A Sporting Chance AGA to tackle massive illegal sports gambling market By Geoff Freeman, President & CEO, American Gaming Association

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Global Gaming Business JANUARY 2016

id you know that nearly $140 billion will be wagered illegally on sports this year alone? Far from a victimless crime, illegal sports betting funds criminal activities, takes advantage of consumers and fails to protect the integrity of America’s favorite pastimes. While the issue of sports betting is complex and multi-faceted, one thing is clear—a federal ban on traditional sports betting outside of Nevada is failing. With this understanding and a common interest to protect consumers and the integrity of the game, the American Gaming Association brought together representatives of member companies to study, dissect and question the current landscape of sports betting. After several months of this review, including research on the scope of illegal gambling, the AGA Board of Directors issued a set of recommendations that mark a major shift in the gaming industry’s approach to sports betting in the U.S. In 2016, AGA will build a broad coalition that will determine whether a rational alternative to current sports betting law exists. Such an alternative could include strict regulation, rigorous consumer protections and robust tools to help law enforcement eliminate illegal sports betting and strengthen the integrity of games. As we move forward, the AGA will work with law enforcement, sports leagues and other interested parties to consider effective approaches that protect consumers and the integrity of sports. Additionally, the multi-year effort will include robust research, aggressive communications and partnerships with a variety of voices

with interest in sports betting, including gaming leaders, law enforcement officials, regulators, legislators and professional sports leagues. While the AGA led discussions around sports betting, it was impossible to ignore the emerging business of daily fantasy sports. In addition to its position on sports betting, the AGA Board of Directors made clear that the industry seeks legal clarity and adequate consumer protections for daily fantasy sports. The gaming industry wishes to see this product succeed and to partner where appropriate. State-

“

The coalescing of diverse viewpoints within our industry marks a significant milestone that will help move this issue forward in a way that benefits consumers, the integrity of sports, Nevada and casino gaming across the country.

”

by-state legal clarity and consumer protections are necessary prerequisites for daily fantasy’s success and future collaborations between our industries. The coalescing of diverse viewpoints within our industry marks a significant milestone that will help move this issue forward in a way that benefits consumers, the integrity of sports, Nevada and casino gaming across the country. As illegal sports betting reaches new heights of popularity in America, our industry can feel confident that AGA has a seat at the table when legislators, sports leagues and law enforcement discuss alternative approaches and regulation of sports betting and daily fantasy sports.

Follow Geoff Freeman on Twitter: @GeoffFreemanAGA.

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FANTINI’S FINANCE

Peering Into 2016 What might happen in gaming in the new year

ow that we’ve welcomed in the New Year, here’s a bit of what 2016 might have to offer gaming. So with that simple preface, here goes.

LAS VEGAS The 2015 story was the resurgence of the Las Vegas Strip, with visitation hitting records and hotel occupancies soaring to near capacity on rising room rates. Gaming volumes did not keep pace, as Las Vegas resorts continue their transition toward tourism with the casino floor as the centerpiece, but not the raison d’etre. The question is, can growth continue in 2016? The obvious answer is yes it can, if the American economy continues to improve and international travel continues its growth, which seems likely barring events that would shatter traveler confidence. The Strip is undergoing something of a building boom again, but this time, it is targeted growth, not just more megaresorts on top of megaresorts. Among examples: MGM Resorts expanding its Mandalay convention center and building a 20,000-seat arena, the touristy strip shopping added by Caesars at the Linq/Bally’s corner and by MGM along New York New York, and the new uber nightclubs capturing free-spending youngish visitors who aren’t necessarily gamblers. Indeed, with no significant new casino hotel capacity coming online for several years, resort operators have pricing power. The obvious beneficiary is MGM with its huge presence on the Strip. But Caesars might be a surprise under new CEO Mark Frissora, especially after it finally restructures. Las Vegas Sands has the room and convention capacity to benefit, while Wynn has a small enough footprint to disproportionately prosper. Though the bigger fish for both companies is Macau.

U.S. REGIONAL GAMING Regional casino markets have also been recovering, though a number of them face increasing competi16

By Frank Fantini

tion as the reality of cannibalization is now firmly established. The stories here are the prudent operators, special situations and emerging companies. The year is ending with Boyd and Isle of Capri producing surprisingly strong results. Neither should be a surprise. Both companies have long made clear their strategies of cost controls, lower debt and targeted capital projects. There is no reason to think those strategies shouldn’t continue to work in 2016. Penn National can be added to that group with its own growth kickers—the Jamul Indian casino to open in San Diego County next year, and tapping the PENN database to infuse recently purchased Tropicana Las Vegas with players. Pinnacle will also be worth watching as it enters a new world as an operator only, following its real estate spinoff with Gaming & Leisure Partners. To be added to the list of those to watch is a familiar name, Station Casinos, as it returns as a public company just as Las Vegas has regained its old growth pattern.

MACAU The long, steep decline appears to be over. The Chinese government has made its points, and any future tightening is likely to be relatively minor fixes to money laundering and public corruption campaigns. Revenues have held fairly steady for several months now, and there is even some cause for optimism. The Macau government appears jolted into a more accommodative mood by losing a quarter of its economy in a single year. A recent survey of Chinese mass-market gamblers by UBS shows they plan 2 percent more trips to Macau in the coming year, and they intend to increase their gambling budgets by 5 percent. More encouraging, it is the higher-end gamblers who spend around $9,800 per trip who plan to visit more often. Unfortunately, this doesn’t mean that casino operators are out of the woods. Their problem is that they are all making multibillion-dollar investments in new resorts in a market that shows little sign of absorbing all of that capacity. The megaresorts will be coming at a fast pace

Global Gaming Business JANUARY 2016

this year: Wynn Palace in June, followed by Las Vegas Sands’ Parisian and MGM Cotai. The conventional—and maybe whistlingpast-the-graveyard—wisdom is that all three will be OK: Wynn will be so fantastic it will take market share, Parisian will be a must-see property, and MGM Cotai will more than triple MGM’s Macau capacity, thus being transformational. As plausible as all those premises happen to sound, we’ll wait and see. Even if they’re right, it might take several years to play out.

EMERGING ASIAN MARKETS If there is good news for Macau, it appears the surrounding countries trying to poach Chinese gamblers might have a tougher road than they had hoped. The Philippines is off to a slower start than planned. It’s hard to believe many northern Chinese will want to visit Vladivostok when it’s 20 degrees below zero; a couple extra hours on a plane to Macau will be a lot more comfortable. Korea has potential to tap Chinese players, but that potential will be limited by governments: theirs in not allowing nationals to play at home, and the Chinese in recognizing the threat and throwing obstacles in the way of their players traveling to the Land of the Morning Calm. Likewise, Vietnam is limited given infrastructure needs and by banning its citizens from casinos. Finally, the same UBS survey that shows Chinese gamblers likely to start to return to Macau also showed the new markets don’t appeal to them much. If they are going to gamble internationally, the United States is their choice. And that is music to the ears of Macau operators, especially Wynn, MGM and Las Vegas Sands. Next month, we’ll look at suppliers, interactive gaming and the rapidly evolving world of fantasy sports and eSports. Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is available by calling toll free: 1-866-683-4357 or online at www.gaminginvestments.com.

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© 2015 Playboy Enterprises International, Inc. PLAYBOY, PLAYMATE, PLAYBOY BUNNY and Rabbit Head Design are marks of Playboy Enterprises International, Inc. and used under license by Scientific Games Corporation. Unless otherwise indicated, trademarks are owned by, or under license to or from, Scientific Games Corporation, or one or more of its wholly owned companies, in the United States or elsewhere. ©2015 Scientific Games Corporation. All rights reserved.

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AGEMupdate AGEM KEY BOARD OF DIRECTORS ACTIONS AGEM MEMBER PROFILE Everi Holdings Inc. (NYSE: EVRI) is uniquely positioned as the casino industryâ&#x20AC;&#x2122;s only singlesource provider of robust payments solutions, vital intelligence offerings and engaging gaming machines that power the casino floor. The companyâ&#x20AC;&#x2122;s mission is to be a transformative force to casino operations by delivering reliable protection and security, facilitating memorable player experiences and striving for customer satisfaction and operational excellence. In 2016, the company plans to introduce 100 new gaming titles, as well as a variety of robust payments solutions and compliance products that help streamline casino operations. On the gaming side, Everiâ&#x20AC;&#x2122;s Core HDX cabinet is creating some industry buzz with its dual 23inch monitors featuring 1080p HD capability, integrated touchscreens and a three-way sound system that helps bring the gaming action to life. Additionally, Core HDX cabinets unlock Everi Bet, the game-changing bet configuration system that gives casino operators the power to easily change features such as minimum/maximum bet, bet levels and progression of multipliers on select games. Everiâ&#x20AC;&#x2122;s integrated kiosks are intuitive and easy to use, offering casino patrons convenience and numerous features including check cashing, bill breaking and even the ability to donate to charity while cashing in casino tickets. Everiâ&#x20AC;&#x2122;s kiosks also feature the companyâ&#x20AC;&#x2122;s patented ATM 3-in-1 Rollover technology that triples the transaction options for patrons, offering them the convenience of choice when accessing cash on the gaming floor. The companyâ&#x20AC;&#x2122;s compliance products are the gold standard for anti-money kaundering (AML) compliance across the gaming industry, allowing casino operators to easily meet Title 31 regulatory requirements with an arsenal of solutions that hundreds of casinos utilize daily. Everi (everi.com) is headquartered in Las Vegas, Nevada with additional offices in Austin, Texas; Reno, Nevada; Chicago, Illinois; Oklahoma City, Oklahoma; Auburn, Washington; Schenectady, New York; Egg Harbor Township, New Jersey; and Macau, China. The company is a Gold-level member and proud supporter of the Association of Gaming Equipment Manufacturers (AGEM). Look for Everi at several key industry trade shows in 2016, including the National Indian Gaming Association (NIGA) tradeshow and convention, which will take place March 13-16 in Phoenix. 18

Global Gaming Business JANUARY 2016

â&#x20AC;˘ AGEM members recently voted to employ the services of Gambling Compliance, the leading provider of independent business intelligence to the global gambling industry, based in London, Washington, D.C., California and Taipei. Members will receive custom monthly reports giving an overview of U.S. and international issues, specializing in legal, regulatory, political and market information and data. This will provide a valuable resource, which will benefit all members. â&#x20AC;˘ Following a lengthy process, the International Center for Excellence in Gaming Regulation at the University of Nevada, Las Vegas has appointed an executive director. AndrĂŠ Wilsenach will take up his new role in February after he completes his tenure as executive director for the Alderney Gambling Control Commission, a position he has held for 14 years. AGEMâ&#x20AC;&#x2122;s commitment to provide $125,000 per year for two years helped to get the center started. â&#x20AC;˘ Once again, AGEM members approved sponsorship of the Southern Gaming Summit Welcome Reception for $20,000. The event will be held in Biloxi May 3-5, 2016. â&#x20AC;˘ In a major turn of events, legal gaming in Brazil seems to be moving forward at last. The Brazilian Senate recently approved gambling legislation, which will allow as many as 35 casinos to be constructed, as well as online gaming. The bill also gives authorization for video lottery games and additional electronic gaming options, and will include casino, bingo and sports betting sectors. AGEM membersNovember will be watching these 2015 developments very closely. â&#x20AC;˘ AGEM welcomed a new associate member at the December meeting. Coretronic Corporation, based in Taiwan, brings the membership total to 147 companies.

RECENT EVENTS The 7th Annual AGEM Golf Tournament and Holiday Reception was recently held at Dragon Ridge Country Club in Henderson, Nevada. The event was a great success and very well attended. Winners of the 2015 tournament were the Konami team, consisting of Tom Jingoli and Mark Morton. FORTHCOMING EVENTS AGEM will once again have a stand at the ICE Totally Gaming show in London. The stand is located in the North Halls at N1-356. Preparations are under way for the show, and AGEM looks forward to meeting all its members at that time.

AGEMindex

After reporting a strong month-to-month increase of 7.6 percent in October 2015, the AGEM Index returned some value in November 2015. The composite index ended the month at 194.33, representing a decline of 2.89 points (-1.5 percent) from the prior month. Compared to a year ago, the AGEM Index reported a gain of 8.74 points (+4.7 percent), which represents the second consecutive month of positive annual growth. Agilysys (AGYS), a technology company that provides software and service to the hospitality industry, was added to the index in the latest period. In November, 12 of the 14 global gaming equipment manufacturers reported month-to-month declines in stock price, with five down by more than 10 percent. Of the two manufacturers reporting gains in stock price during the month, both were up by less than 5 percent.

AGEM Agilysys

Exchange: Symbol (Currency) Nasdaq: AGYS (US$)

Ainsworth Game Technology

ASX: AGI (AU$)

Aristocrat Technologies

ASX: ALL (AU$)

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

Taiwan: 3064 (NT$) NYSE: CR (US$) Nasdaq: DAKT (US$) NYSE: EVRI (US$) OTCMKTS: GLXZ (US$) Nasdaq: GPIC (US$) NYSE: IGT (US$)

INTRALOT S.A.

Konami Corp.

TYO: 9766 (ÂĽ)

Scientific Games Corporation Transact Technologies

Nasdaq: SGMS (US$) Nasdaq: TACT (US$)

Stock Price At Month End Percent Change Nov-15 Oct-15 Nov-14 Prior Period Prior Year 11.10 11.37 12.28 (2.37) (9.61) 2.40 3.18 2.24 (24.53) 7.14 45.78 9.49 9.32 6.51 1.82 20.00 21.00 30.85 (4.76) (35.17) 52.02 52.64 59.03 (1.18) (11.88) (27.33) 8.67 9.70 11.93 (10.62) 3.82 4.68 7.10 (18.38) (46.20) 0.20 0.24 0.38 (16.67) (47.37) 7.39 8.86 9.28 8.25 (4.53) 15.53 16.22 17.03 (4.25) (8.81) 16.95 1.38 1.51 1.18 (8.61) 2,881.00 2,758.00 2,243.00 4.46 28.44 9.22 11.09 15.14 (16.86) (39.10) 8.85 9.57 5.49 (7.52) 61.20 Change in Index Value

Index Contribution (0.07) (1.52) 2.43 (0.03) (0.42) (0.48) (0.55) (0.02) (0.04) (1.56) (0.24) 1.27 (1.60) (0.06) (2.89)

AGEM Index Value: October 2015

197.21

AGEM Index Value: November 2015

194.33

AGEM is an international trade association representing manufacturers of electronic gaming devices, systems, 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.

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Changing the Game The newly merged International Game Technology works on crafting the future of gaming— and reinventing the Wheel By Frank Legato

GT is in the future business. Always has been, actually. In fact, the future was the reason the company was founded in the first place. Gaming legend Si Redd formed the Reno-based company that would be incorporated in 1982 as International Game Technology because the former Bally Manufacturing did not buy into his vision of the future—that video poker, his invention, was actually going to be a profitable product. Redd, of course, proved Bally wrong on video poker, and proceeded to reinvent the reel-spinning slot machine business that Bally had dominated for decades. Progressive slots, themed games like Wheel of Fortune, video slots that brought icons of popular culture to life, volatile penny games… They are all examples of how IGT reinvented gaming technology and created a new future for the industry. For the past year, the newly merged International Game Technology Plc.— the combination of the former suppliers IGT and GTECH—has been back at work reinventing the slot sector, and the nature of the industry itself. IGT’s legendary R&D prowess still means new experiences for the traditional casino slot machines—which, by the way, IGT still sells more of than nearly all other major suppliers combined—using the latest technology to create vastly entertaining games in ways no one has ever encountered on a gaming machine. However, while serving the massive audience IGT games have built over the years, the company’s executives, headed by CEO Marco Sala, are continuing to set the company up for the future with new ways to deliver content. Sala, who was CEO of the Rome-based former GTECH parent Lottomatica, has spent much of the eight months since the newly merged IGT rang the bell at the New York Stock Exchange developing a strategy that takes full advantage of everything both legacy companies brought to the table. It’s a job Sala’s done before. GTECH itself was a product of mergers, having absorbed highly regarded slot suppliers Atronic and Spielo, creating a diversified business of lottery and gaming long before last year’s mega-mergers. Now, IGT’s huge game development operation is combined with the sophisticated network of online, retail and gaming channels of GTECH’s lottery business, which Sala’s team is looking to exploit to full advantage. For the North American casino market—land-based and online—Sala is aided by Renato Ascoli, who is CEO of North American gaming and interactive. 20

Global Gaming Business JANUARY 2016

“

We offer our customers the industry’s most compelling portfolio of games, systems and solutions from a single point of contact. —Marco Sala, CEO, IGT

”

Combining the Best The arsenal of content at the command of IGT’s research and development teams is remarkable by any measure. Each legacy company had its own distinct personality, innovative game styles and groundbreaking technology. Timetested Spielo games have been popular in Canada for decades. On the U.S. casino side, GTECH had already incorporated the pioneering games of the former Austrian company Atronic into a new generation of games. It all blended seamlessly with the vast game library of leading slot manufacturer IGT. “The legacy companies brought highly complementary product portfolios and technologies to the new IGT,” says Sala. “Both companies also brought unique experience as operators in gaming and lotteries respectively, which we leverage to inform our product roadmap. Our combined content and systems

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The new Wheel of Fortune game is only the first inkling of the things to come as the legacy platforms, play styles and themes merge into a whole new force in game design.

solutions encompass best-in-class offerings for our customers across the B2B and B2C spectrum of gaming, lottery, interactive and social. Each platform can share content, data, channels and payment tools.” Sala says the company’s strategy moving forward is centered under the banner “Customer First.” “In addition to our industry-leading R&D investment and innovative technology across all platforms and regulated segments of gaming, we have a distinctive market strategy,” Sala says. “Our longstanding customer and government relationships are reinforced by our strong local market presence. We offer our customers the industry’s most compelling portfolio of games, systems and solutions from a single point of contact.” “We’re trying to build a new success story for IGT,” adds Ascoli, “on specific pillars, and as I always remind my team, the first pillar is ‘Customer First,’ which is not just a motto; it’s a day-by-day attitude. We began with a very important process that legacy IGT had in place, which is called CAB—Customer Advisory Board. We listen a lot to our customers.” And customer feedback, says Ascoli, will be vital as IGT merges the complementary technologies of its legacy companies.

Combining Forces September’s Global Gaming Expo provided the first forum to display the capabilities of the new IGT’s combined R&D forces. The showcase of legacy IGT and GTECH games was as spectacular as ever, including a sea of new steppers in the S3000 series, intriguing new high-profile brands like Breaking Bad and Orange is the New Black, and a thorough line of new specialty video poker.

But one standout at G2E was the first product that is a combination of those complementary technologies Sala mentions. It uses what is easily the most innovative slot technology of the former GTECH, True 3D. The awardwinning technology was launched at G2E two years ago with the game Sphinx 3D, a slot that dazzled with the most realistic 3D effect ever seen on a slot machine—or anywhere else, without the aid of 3D glasses. GTECH followed up the hugely successful Sphinx 3D last year with several other True 3D titles, but after the merger, it was IGT’s turn to exploit the technology. The choice of theme wasn’t hard—the most famous IGT theme, the legendary Wheel of Fortune, along with its most legendary base game, Double Diamond. Wheel of Fortune Double Diamond 3D replicates the classic stepper game in video 3D, with symbols popping off the reels, and a fourth bonus reel leading to full-HD video sequences. “True 3D certainly provides us with an excellent opportunity to expand the technology into other popular titles from the legacy IGT portfolio,” says Sala. “We experienced very favorable customer response to our introduction of Wheel of Fortune with True 3D at G2E, and our True 3D portfolio now includes 10 different games. Our roadmap includes a number of other True 3D titles. As we work to develop these games, we will work closely with our operator partners to make sure our game development for True 3D is aligned with the interests of their players.” The new Wheel of Fortune game is only the first inkling of the things to come as the legacy platforms, play styles and themes merge into a whole new force in game design. IGT will continue to refine products like TournExtreme, a feature-rich new instant tournament system, and new skill-based bonuses—like the Centipede and Texas Tea Pinball games, which allow players to dust off their old arcade skills to gain an edge in a bonus game. The new TMZ game, a hit at G2E, plays off the celebrity tabloid show with an innovative “photo booth” feature—the player snaps his picture, which is animated into the bonus rounds, making the player part of the TMZ “crew” traveling to various celebrity locations. “This type of innovation appeals to the millennial, yet we believe it also has broad appeal among all slot machine players,” says Sala. “This universal appeal is important to our customers, who still want us to focus a great deal of content creation on their core players.” IGT will continue to serve those core players, but what’s coming in the future also will apply the gaming and lottery skills honed by the legacy companies to serve a completely new generation.

Millennial Madness Game development experts at IGT are among those currently advising regulators in Nevada and New Jersey as they formulate the rules for skill-based games—new games envisioned with variable return-to-player percentages according to the skill of the player. No one knows the games that ultimately will result—be they Candy Crush-style multi-level games, video shooting competitions or other new experiences. It is hoped the new games will appeal to the millennial generation that will soon be of prime spending age but do not go for traditional slot machines. “We will work closely with our customers to determine which types of games in the skill-based category are of interest to them and their players,” says Sala. “We preceded Texas Tea Pinball with other games that feature skill-based elements in the bonus event, such as Atari Centipede and Race Ace, so we bring great experience to the concept. “We are watching closely how the regulation evolves,” adds Ascoli, “and we are more than ready to introduce more skill-based content into the core game, should our customers confirm this is what they like.” Skill is only the beginning in IGT’s exploration of what may appeal to the JANUARY 2016 www.ggbmagazine.com

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“

We’re trying to build a new success story for IGT, on specific pillars, and as I always remind my team, the first pillar is ‘Customer First,’ which is not just a motto; it’s a day-by-day attitude.

”

—Renato Ascoli, CEO of North American gaming and interactive, IGT

emerging millennial generation. The company has been at the head of the curve in creating new outlets to capitalize on what millennials love, beginning when the company realized the potential of social casinos before anyone else, landing on the ground floor of a new way to spread content in its DoubleDown social casino. Gaming in the social space aside, a product launched last year at MGM could offer the best glimpse yet at how casinos in the future will need to accommodate millennials. OnPremise, which debuted last year at MGM properties in Las Vegas, capitalizes on the one trait that is common to and essential for any millennial: They never put down their mobile devices. OnPremise enables mobile sports betting and casino games on players’ mobile devices, anywhere in a property. MGM is adding the capability to lounges already offering interactive tables with social casino games. The OnPremise product won first place for “Best Consumer Service Technology” in GGB’s 15th Annual Gaming & Technology Awards. “The quintessence of the company coming together is the OnPremise product,” says Ascoli. “At MGM, it is offering the opportunity for players, sitting in a bar or in a restaurant, a pool, a spa, in any time of the year, to place a bet, or to play a casino game on the iPhone.” “The OnPremise solution will evolve to connect to any casino’s application so players can receive loyalty rewards by playing slots in the property’s social casino,” adds Sala, “extending the entertainment experience after they have left the casino property.” While OnPremise provides a functionality that will get both social and casino game content to millennials in their own language, so to speak, Ascoli says casinos and manufacturers are studying new ways to present the games utilizing the unique preferences of the demographic. “Millennials usually like some features that perhaps a standard casino player would not like that much,” Ascoli says. “They like leaderboards, for instance. They always want to know where they stand, compared to someone. They want to be in control of the game; they want to tweak and change the color or the functionality. So, we need to provide these kinds of things. We need to start from there to, let’s say, introduce fresh blood into our business.” “We recognize the need to create new game styles and distribute them to players where they want to play them,” says Sala, “so mobile is an important area of focus for us. With DoubleDown Casino and OnPremise, we have established good momentum distributing content to the mobile space. “OnPremise brings together the interactive technology that we brought with GTECH with the mobile technology that we brought with a recently acquired company, and our sports-betting capabilities, that we developed starting 22

Global Gaming Business JANUARY 2016

from Italy—combined with the distribution of casino games, and connected to a central system, which is the legacy IGT’s true capacity.”

Doubling Down Whether on mobile, online or land-based distribution channels, one other way IGT is changing the way business is conducted in the casino industry’s slot sector is in the social gaming arena. Sala says the company is using its DoubleDown social casino, acquired in a pioneering move in 2012, as a way for customers to improve business in the land-based arena. “We are now leveraging our Advantage system technology to provide our casino partners with marketing and promotional opportunities to DoubleDown Casino players as an extension of casino loyalty programs,” Sala says. “DoubleDown’s recent success is strongly dependent on the quality of the games that were taken from the land-based operations into the social gaming space. But now we’re doing something on the opposite side. We are taking successful games developed for the interactive market, or for the social market, and we are sending them back to the land-based side.” At G2E, the 50 new core games displayed included two taken from the internet space. “We chose the most high-performing (social) titles,” says Ascoli. “This can be reassuring to customers. Imagine you are an operator and you’re about to invest your cap-ex on a new machine. If you’re allowed to see the track record of content in a similar environment, which is the interactive space, it’s much more instructive.” “The success of DoubleDown Casino is built upon our commitment to offering the authentic IGT slot play experience over desktop and mobile devices,” says Sala. “The content on DoubleDown Casino creates affinity for the games in casinos, inspiring players to look for their favorite games in casinos to expand the entertainment experience. DoubleDown Casino also serves as a valuable resource for us in terms of testing new content. We can observe a game’s performance in online and mobile play, which provides insight as to how well it may perform in a casino.”

Combining Disciplines Going forward, Sala and Ascoli will continue to explore ways to combine resources to improve products on both the lottery and gaming sides. “This combination of legacy organizations is highly complementary, resulting in a balanced business with the industry’s largest global footprint and a diversified product mix that can cater to any global customer need,” says Sala. “If a customer wishes to enter a different segment of gaming, we have the experience and portfolio to support them. “The new IGT is well-positioned to transform the gaming industry by leveraging our strong competitive positions across growing global market segments of lottery, gaming machines, systems, solutions and interactive.”

For more than 20 years, GLI has been the global leader in iGaming testing and certification, standards consultancy and thought-leadership. As a trusted partner, GLI has proudly assisted numerous existing and emerging jurisdictions to develop or update their iGaming technical standards enabling them to succeed in fair and secure iGaming expansion endeavors. We have worked hard to earn our status for best in class integrity, quality, competence, and independence â&#x20AC;&#x201C; an unsurpassed reputation accepted by regulators, suppliers, and operators throughout the iGaming world. That's proven iGaming leadership! So contact GLI today, and discover how you can get so much more than just testing.

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EMINENTLY

WATCHABLE GGB’s

25 People to Watch

for 2016

ver the years, achieving a position on GGB’s 25 People to Watch has been a career milestone. Since 2003 when the first class was honored, the 300 people recognized have become the leaders in the industry, known for their innovation, their spirit and their ingenuity. This year’s class is no different. From Las Vegas to Brazil; Ohio to Macau; Washington D.C., to the edge of the internet, you’ll read about dynamic individuals with the talent and vision that will lead the industry for many years to come. The 2016 class of 25 People to Watch was chosen by the GGB Advisory Board, with input from many readers. So make sure you understand who will influence gaming in the years to come. The path to the future runs through this year’s honorees.

STRIP SENSE Bill McBeath President & CEO, The Cosmopolitan of Las Vegas

s someone who has spent his entire career on the Las Vegas Strip, the new owners of the Cosmopolitan of Las Vegas could not go wrong when they chose Bill McBeath to lead the often-beleaguered property. Conceived as one of the highly touted “mixed-use” developments on the Las Vegas Strip in the 1990s, the Cosmopolitan seemingly could not get out of its own way. While its non-gaming amenities were undoubtedly successful, its casino struggled while operated by Deutsche Bank, which foreclosed on the original owners. Now that the private equity firm Blackstone has taken over, McBeath is able to run the casino the way he has other properties over his long Strip career with Mirage Resorts and later MGM Resorts, where he most recently was the CEO at Aria. 24

Global Gaming Business JANUARY 2016

“It’s really pretty simple,” says McBeath. “The strategies I employed were able to correct a lot of the deficiencies in the operating platform in the first year. Now it’s finetuning, expanding the brand and the options provided to the customers, and increasing the awareness across the high- and mid-end of the customer segments.” Blackstone truly understands hospitality and the risk/reward mechanism in casinos, McBeath says. “We’ve been able raise our limits,” he says. “The bank didn’t understand volatility and didn’t want volatility. Blackstone takes a much different approach. They understand that there are going to be ups and downs, but at the end of the year, if we manage operating and acquisition costs correctly, the math will take care of itself and this will be a profitable segment.” McBeath says improvements in slot marketing and database management have helped to boost casino revenues and allowed the Cosmopolitan to post a profit for two consecutive quarters for the only the second time in its history. However, the story of the Cosmopolitan has always been in its superior room product, popular nightclubs, cutting-edge entertainment, food-andbeverage outlets and successful meeting-and-convention business. But even there, McBeath is making changes. While the hotel’s nightclub, the Marquee, managed by Tao, is still one of

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the top venues in Vegas, McBeath is concerned about the prices paid to the leading DJs. “It’s pretty crazy now, but those things have a way of correcting themselves,” he says. McBeath says the eclectic mix of entertainment at the Cosmopolitan will become a bit more approachable. “Entertainment should be designed to make money on its own,” he says. “It has to be a stand-alone profit center, which was not the focus here. We booked a broad range of acts, some of which were outside the scope of our demographics. Some of these young acts attracted people who aren’t even old enough to drink or gamble. They didn’t give us the ancillary contributions. We’ve rebooted the entertainment program and will present much more relevant acts to a cross section of demographics that fit the other products in the building.” The restaurants at the Cosmopolitan have also been successful. “Food and beverage has always been a significant part of the growth and profitability of the Cosmopolitan, and that was one of the compelling reasons that Blackstone saw value in the property. And there hasn’t been a lot of turnover.” McBeath says some new restaurants will be opening in the hotel this year, all of which are recognizable but new-to-Vegas brands. “I want food-and-beverage to be a driver of people,” he explains. “It’s hard to differentiate yourself, and a quality culinary experience and a quality entertainment experience can do that. People are demanding to be entertained during dinner. You can’t just serve them a great steak and Caesar salad anymore. You have to have design, ambiance and great service.” With a focus now on the high end of the market, McBeath says the future of the Cosmopolitan is often dependent upon macro-economic issues, even the economy of China. “With Macau revenue now retreating rather than expanding,” he explains, “that impacts how quickly we can reach our goals. A lot of our initiatives to drive an increase in EBITDA are tied to the international economy. We have a very solid foundation for this year’s financial performance. We’ve achieved a much higher return in our first year than anyone would have imagined. And we’ll build from that.” —Roger Gros

NON-GAMING

GROWTH

Elena Shampaner Vice President of Strategic Initiatives, Pinnacle Entertainment

ike so many in the gaming industry, Elena Shampaner got her start at the University of Nevada, Las Vegas. After receiving her M.S. in hospitality administration, Elena began working for MGM Mirage. Through her dozen years in the industry, she has risen from the ranks holding positions as manager of European development for Caesars Entertainment (then Harrah’s), project director, business development manager, president’s associate, and her current role, vice president of strategic initiatives, which she holds with Pinnacle Entertainment. Shampaner’s current position allows her to shine in what she considers an increasingly important business segment, the non-gaming side of the gaming industry. “A good foundation was laid in 2015, sitting and looking at the pipeline,” Shampaner says. So what exactly does 2016 and beyond hold for Shampaner? In her words, 2016 will be a year where “my people skills will be tested.” Pinnacle will be taking several new initiatives in business strategy, some of which are in the retail area. Instead of simply supplying the outlets with new merchandise, Shampaner’s job will be to develop true partnerships with existing brands, which will tie in with Pinnacle’s own brand in some of its retail outlets throughout casinos. The idea is to tie loyalty of multiple brands together to increase overall loyalty.

Not limited to just retail, but also new dining and entertainment concepts, she will be spearheading and supporting initiatives to build these relationships. If there is someone who can handle this job, it is Shampaner, who understands not only the value of non-gaming, but also the paradigm shift the industry currently is going through. “There are many opportunities for new revenue streams if a casino company can truly embrace the non-gaming amenities,” she says. Shampaner’s multi-disciplinary approach was further honed upon earning her Ph.D. in hospitality administration from UNLV. In her 2012 dissertation The Non-Gaming Business of the Gaming Industry: Evaluating the Contribution of Non-Gaming Amenities at a Casino-Resort Property, one finding which came through a series of analyses was the relationship and benefit of non-gaming amenities to a property’s gaming revenue and overall success. While many industry people have concluded integrated resort guests are eschewing gaming in favor of other amenities, Shampaner found that an increase in spending throughout other areas actually led to an increase in gaming spending. It is findings such as these and a specialty in data analysis and research that have catapulted Shampaner to her current position. In addition to building relationships with other companies, 2016 will be “an opportunity to show my leadership skills. I look forward to that very much,” she says. —John Lukasik

JANUARY 2016 www.ggbmagazine.com

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CHINA SYNDROME Wilfred Wong President and Chief Operating Officer, Sands China

he retirement of the effective Ed Tracy as president of Sands China opened an opportunity for the parent company, Las Vegas Sands. With government rulings and actions increasingly impacting operations at the company’s Macau properties, maybe it was time to appoint someone who understood the inner workings of the Chinese and Macanese governments. That person was Wilfred Wong, an experienced businessman from Hong Kong. Wong most recently was chairman and chief executive officer of the Hong Kong-listed Hsin Chong Construction Group Ltd. Prior to that, he served in management positions at other public companies in Hong Kong. In addition, Wong served in many positions appointed by the National People’s Government, as well as being a member of the People’s Congress of the People’s Republic of China for 15 years. In his first media interview since being appointed in September 2015, Wong told GGB that it was the challenges presented by the current situation in Macau that attracted him. “I like to get involved in a company that has potential, somewhere I can take it to new heights,” he says. “Then when it stabilizes, I get the urge to move up to something more exciting. “And they caught me at this stage. I had taken my former company to historical highs in both revenues and profits. And the possibilities at Sands China are endless, so I decided to accept this challenge.” Wong admits that the challenges are great. “We all know this is not the easiest of times to be in the gaming industry in Macau,” he says. “But it’s also a time when we need to diversify the business to other tourist attractions and make sure we stay the most competitive among our competitors. We need to deploy the best talent within a large company.” Wong, who has no gaming experience, says he’s learning quickly from such talent as longtime Macau gaming executive Ciaran Carruthers, player development expert Kelvin Tan and LVS gaming chief Andrew MacDonald, among many others. “I’m a fast learner,” he says. “Just today, I spent two hours in the surveillance room trying to understand the situation and strategies deployed in that part of the business. I love to learn about the industry. “But Sands China is more than just the gaming industry. It is hotel management, retail, F&B, entertainment and MICE, as well as gaming. So I don’t see it as anything different from my previous jobs. But I have greater confidence in this job because of the talented people we have in this company.” Wong is convinced that the current campaign to attract more tourists rather than gamblers to Macau will succeed. He points out that business at Sands China properties has not been affected by the recent openings of Phase II of Galaxy Macau and Studio City. “I have confidence that as more tourist attractions open on the Cotai Strip the pie is going to get bigger,” he says. “That’s exactly what we have seen with the openings of these two projects. “Our hotel occupancy this year has averaged over 80 percent, with a good ADR (average daily rate).” 26

Global Gaming Business JANUARY 2016

One area where Wong has much expertise is construction, and he has immersed himself in the ongoing development of the Parisian Macao. “We must be assured that the construction remains on track,” he says. “We monitor it very closely. I take a very keen interest in these programs.” He says the slowdown in Macau has actually benefited this development. “We’ve allocated some dealers and other personnel from our properties to the Parisian, so we will open seamlessly. We are also filling up our retail spaces, because we’re adding another 200 or so shops to our retail inventory. This is important because we want to be a destination where people can come and enjoy everything we have to offer.” Wong says the retail experience at the connected Sands China properties on the Cotai Strip will make it the mecca for shoppers in all of Asia. “With the addition of the Parisian,” he says, “we will have a total of 850 shops in our properties, and they will be all linked up via foot bridges that have been approved by the government from one building to the others. This will be a shopper’s paradise.” While all other Cotai properties are including some MICE space, that space is still dwarfed by the square footage offered at Sands China properties, principally the Venetian Macao. Wong says that gives his company a great advantage. “This is a tribute to the foresight of our chairman (Sheldon Adelson),” he says. “He saw in the beginning that this great convention and MICE facility would be an important business. We’re now seeing this advantage.” Wong says analysts often ignore the underlying positives in Macau, as well. “The opening of the Macau-Hong Kong-Zhuhai bridge is going to be a significant enhancement to our capability to house and host international conventions,” he says. Also, the actual reasons for the Macau slump are misinterpreted, says Wong. “The slowdown in Macau is more a result of a slowdown in the global and Chinese economy than anything else,” he points out. “When people are in this situation, they don’t spend so much money on gaming. Anecdotally, we see people who used to come to Macau once a month who now only come once every four or five months. They tell us business is not good, and that they have to attend to their own business first before they can relax. This is the main factor in the slowdown. “But now that China is linked by super highways and high-speed rail, we can reach a much bigger area than we could in the past.” —Roger Gros

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SOUTHERN EXPOSURE Brent Pinkston Chief Operating Officer, Wind Creek Hospitality

eet the non-undercover boss. Brent Pinkston, chief operating officer of Wind Creek Hospitality, is more than a leader to 2,500 employees covering six properties throughout Alabama and Florida for the Poarch Band of Creek Indians. He is, at select times, their colleague. For about an hour a week, the 13-year gaming veteran puts on a uniform and performs one of his employees’ jobs. He has done practically every one of them in this cameo role and subsequently implemented many staff suggestions. “It’s important to see what your team members are involved with,” says the Chicago native, whose career includes a stint as executive director at the Pearl River Resort in Mississippi and executive director of slots and marketing at the Las Vegas Sands before joining this company in 2007. He has been the COO for three years. “You can obtain great ideas from the front-line staff, who perform that job every day,” Pinkston indicates. “My favorite job? Being a dishwasher. You turn off the phone an hour or so, do all the cleaning, and relax to the noise of the dishwashing machine. The hardest job? Housekeeping. It is physically demanding, and the speed at which you need to work is significant. You not only have to be clean and spotless and leave that room in great four-diamond condition, but it must be done fast—and yet you cannot rush through it.” Pinkston’s evolution combines marketing and financial backgrounds. The marketing expertise brings customers into the property, while financial acumen helps provide them a positive gaming experience. He has merged both disciplines well at the ripe young age of 40. “Generally being the youngest guy in the room, you want to push, push, push,” he says. “Others have taught me to have patience and understand there is a process that must be gone through. From them, I have also learned that attention to detail is very important, especially in a resort type of environment.” One detail he champions is Wind Creek’s payouts of 94 percent, via electronic bingo, compared to 92 percent on slots for nearby competition. Another detail is a service providing drinks on demand. “Two complaints I have long heard from customers is ‘When I go to a casino I can’t win’ and ‘I can’t get a drink,’” he says. “We have payouts that are much better than our competitors and we serve drinks in an expedited fashion. Every customer can order a drink from the gaming machine (via touchscreen). The order pops up at the bar and the drink is made in less than 45 seconds. Cocktail servers run it out to the customer. It will usually be about five minutes. If some problem occurs and the drink is not delivered in under 15 minutes, the guest will get $5 in free play.” Wind Creek completed an expansion of about $65 million for its Montgomery, Alabama, property in December. Its 2016 plans will be aggressive to expand their brand, he says. —Dave Bontempo

Global Gaming Business JANUARY 2016

SUCCESS BY ASSOCIATION Ron Rosenbaum Chief Operating Officer, American Gaming Association

t’s been more than two years since Geoff Freeman took over as president and CEO of the American Gaming Association. One of the first appointments he made was to name Ron Rosenbaum as chief operating officer of the organization, responsible for member engagement and retention, finance, human resources, IT operations and conferences and events, including G2E, the world’s largest gaming trade show. With a long history of association management, Rosenbaum most recently was senior vice president, marketing and development for the Sports and Fitness Industry Association. Rosenbaum is proud of the accomplishments the AGA has posted in those first two years. “The most important change we’ve made is to restructure the association to allow the AGA to be more inclusive and ultimately be truly representative of the casino gaming industry,” he says. “Now, when we speak on behalf of the industry, our perspective is informed by the majority of the industry. We’ve given everyone in the industry a seat at the table, which makes us smarter and better prepared on issues of importance. “We’re also telling the story of gaming, to push back using real facts on a lot of these antiquated myths that have existed for some time. We have a wonderful story to tell.” In the last two years, the board of the AGA has expanded, bringing more knowledge and credibility to the organization. “By having a board that is larger and more substantial, we can get a variety of different perspectives on issues where we’re deciding on what kind of position to take.” With the U.S. presidential election ramping up in 2016, Rosenbaum believes the association’s “Gaming Votes” campaign will play an important role in getting the industry’s story out to elected officials and would-be elected officials. “This is a real opportunity for us to educate politicians who have aspirations for the White House,” he says. “But beyond that, we can get out on a national platform and even into the states to tell the story of this great industry.” This campaign has also helped the AGA build relationships with congressmen and public officials who advocate for the industry. “When you have allies and advocates that you can call upon in time of need, it’s a very powerful tool,” says Rosenbaum. One of the issues the AGA will address this year is sports betting. Rosenbaum says designing a pro-sports betting campaign was very process-driven. “We created a sports betting task force, made up of many individuals within the gaming industry,” he says. “When the time comes to advocate, we’ll know what the industry thinks and we’ll be prepared to take a position.” In addition to board members who are active in the gaming industry but also have business in other industries, the AGA has signed up its first tribal board members. “We wanted to bring together all these members under the AGA tent,” says Rosenbaum. “I feel like we’re really in a good place and will continue our growth and impact over the next year and in the future.” —Roger Gros

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BANKING ON

BRAZIL

Blairo Maggi, Brazilian Senator

ust like with Japan, the gaming industry has always salivated when considering legalized gaming in Brazil. Though there has been an active bingo industry in the country, casinos would be a game changer for the massive South American nation. In September, the government created a gaming commission, the Special Committee of the Regulatory Framework of the Games. Late last year, the Brazilian Senate approved a bill that sets up the outline of a gaming industry, known as Agenda Brazil. Introduced by Senator Blairo Maggi, the bill now must be approved the lower house, the Chamber of Deputies. One of the authors of the bill, Senator Ciro Nogueira, says Brazilians gamble more than $4 billion every year with illegal gambling operators. Regulation, he says, could bring gambling above ground and provide taxes for the government. Maggi says legalized gambling would “remove the corruption that exists today, and at the same time, realize a significant increase in public stocks,” without this being translated into increased burdens on other taxpayers. Maggi is the former governor of the state of Mato Grosso, where his family was the leading producer of soybeans. Maggi has been a fierce proponent of agriculture in Brazil, which accounts for almost a quarter of the country’s gross domestic product. More than 10 million have been rescued from grinding poverty as a result of the rise of agriculture, says Maggi. But all of this comes at a price. To increase agricultural production, large swaths of the Amazon River basin were deforested, a price Maggi was willing to pay at the time. But after being awarded the “Golden Chainsaw” by the environmental activist organization Greenpeace, Maggi saw the error of his ways. “Such a symbolism made me realize I should focus on showing that we would do things differently,” Maggi told Forbes magazine. Maggi also is a proponent of attacking the red tape that makes progress so difficult in the country. “Today in Brazil we spend too much time in the war of paper, the stupid bu-

GROWTH MODE

Jay Snowden Chief Operating Officer, Penn National Gaming

n the two years since Jay Snowden assumed his current role as chief operating officer of Penn National Gaming, his company has been in a perpetual growth mode. From opening racinos in Ohio and Massachusetts to acquiring a route operator in Illinois to finally gaining a foothold on the Las Vegas Strip in its purchase of the Tropicana, Penn has morphed from a small regional operator into one of the industry’s largest companies. Under Snowden’s watch, Penn pioneered the practice of placing gaming properties in real estate investment trusts, its Gaming and Leisure Properties, 30

reaucracy,” he says. “Brazil has a hard time making public works become a reality. Here, it is not easy to transform ideas into projects and actions and deliver to the population what is desired.” The gambling bill would create as many as 35 casinos in Brazil in all parts of the country. Each state could have up to three casinos, based upon the population of the state. Suggestions to limit the casinos to undeveloped areas of the country were rejected. Each state would have the opportunity to accept or reject casinos, which would only be approved as part of an integrated resort, with hotels, shopping, restaurants, meeting space and more. The casino would occupy 10 percent or less of the project’s total square footage. A license would be issued for a 30-year period. Maggi’s Agenda Brazil has also been promoted by the president of the Senate, Renan Calheiros. Bingo also is a beneficiary, with the bill permitting one bingo hall for every 250,000 people. Each bingo hall could offer up to 50 bingo machines. As in all his legislation and plans, Maggi says educating the electorate on the bill is crucial. “Remember that many times the people you are discussing with do not have the same knowledge about that given subject,” he says. “First, teach people. To convince people, they have to know as much as you about the given subject. Many people make mistakes because of their lack of knowledge.” —Roger Gros

Inc. (GLPI) REIT, spun off as a Penn subsidiary in late 2013, currently owning 19 properties it leases to the operator and another two—in Perryville, Maryland and Baton Rouge, Louisiana—it both owns and operates. For 2016, Snowden will look to seize opportunities not only in Las Vegas, where it will capitalize on its new Strip presence, but across the country. In the Midwest, Penn is moving on two fronts. The GLPI subsidiary is currently working to complete the $4.75 billion purchase of the 14 casinos of Pinnacle Entertainment, and Penn is moving to cash in on Illinois’ VGT law, acquiring Prairie State Gaming, a route operator with more than 1,100 video slots in 270 taverns and cafes around the state. Snowden says Illinois, where operators have consistently faced challenges from high taxes to threats of gaming expansion, is now firmly on the company’s

Global Gaming Business JANUARY 2016

growth radar. “We’re looking at Illinois in 2016 and beyond differently than we have the last several years,” Snowden says. “We’re looking at it as a state where we can grow our business. We’re really excited about that.” Illinois is not the only part of Penn’s regional empire Snowden says will contribute to growth in 2016. From Ohio, where the company has four casino properties, to Pennsylvania, to San Diego, where the tribal Hollywood Casino Jamul will open by mid-year, Snowden says Penn will reap the benefits of the recent resurgence of regional gaming. “We’re finally starting to experience some economic tailwinds in the form of lower unemployment, wage growth and low gas prices,” Snowden says. “Those factors are all real, and result in extra cash in your pocket. When our customers have more disposable income, they love to engage in gaming, a form of entertainment and their favorite pastime.” Snowden says the company’s focus in the coming months will be to establish, integrate and grow all of its new properties, including building customer

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loyalty at Plainridge Park, the first casino in Massachusetts, where net slot win is already more than $12 million a month despite a limit of 1,250 slots. Meanwhile, Snowden says the company is ready for new competition for its Hollywood Casino at Charles Town Races in West Virginia, which is facing the opening in nearby Prince George’s County, Maryland of the massive MGM National Harbor late this year. “We’ve really been focusing the past couple of years on enhancing the offerings and experiences at Charles Town,” Snowden says, noting the property’s popular boutique hotel, and recent additions of restaurants, an entertainment facility and other amenities. “We’re really focused on what we can control, which is ensuring customers have a reason to visit us, even after MGM National Harbor opens. The good news is we think this is still a deep and still under-penetrated market. We can all prosper for the long term given the number of casinos and the significant population growth there.” But perhaps the biggest item on Snowden’s 2016 agenda is consolidating the company’s new position in Las Vegas, where its newly purchased Tropicana will give Penn’s regional customers a spot closer to the heart of the action than the M Resort, the local gem far south on Las Vegas Boulevard which the company recently took over completely from builder and founder Anthony Marnell. “This was a transformational event for the company,” Snowden says. “You’ve heard us say for many years that it is a strategic priority for Penn National Gaming to find the right casino for the right price in the right location in Las Vegas on the Strip, because we know our 3 million-plus active customers in the regional database visit Las Vegas. “As beautiful as the M is, and as great as that acquisition has been for us, when people go to Las Vegas, they want to stay on the Strip.” The key to success for Penn in Las Vegas, says Snowden, will be the operator’s national Marquee Rewards player’s club. “Now, our customers can earn their Marquee Rewards points and comps in their regional markets and those points are portable to Las Vegas when they visit the Tropicana and M resorts,” he says, noting that the company is targeting Marquee club integration for the Trop by mid-year. If there is any safe bet for 2016 and beyond, according to Snowden, it is that Penn and GLPI will continue to grow, adding new casinos and racetracks (inclusion of racing in properties is “in our DNA,” he says) wherever the opportunity arises. “We plan to be aggressive, opportunistic and always disciplined; that’s our approach here,” Snowden says. “We’ve been a growth company since the IPO over 20 years ago, and we will remain a growth company.” —Frank Legato

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

Wishing you Good Fortune in 2016 We’re excited about the future of gaming and our role in helping casino owners, operators and executives; gaming manufacturers and suppliers; private equity firms; and investment banks as they reshape the industry. We had a fantastic 2015: welcoming new team members, expanding to new markets and tackling new projects. Most importantly, we were proud to help our clients accomplish their goals. As we begin 2016, we wish you a happy, healthy and prosperous new year!

GREENBERG TR AURIG, LLP | ATTORNEYS AT LAW | WWW.GTLAW.COM The hiring of a lawyer is an important decision and should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and our experience. Prior results do not guarantee a similar outcome. Greenberg Traurig is a service mark and trade name of Greenberg Traurig, LLP and Greenberg Traurig, P.A. ©2015 Greenberg Traurig, LLP. Attorneys at Law. All rights reserved. Contact: Martha A. Sabol in Chicago at 312.456.8400. °These numbers are subject to fluctuation. 26627

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ROAD WARRIOR John Connelly Global CEO, Interblock Gaming

nterblock Global CEO John Connelly is a road warrior if there ever was one. Connelly was on the road about 20 days a month during his first year with the electronic table game maker, working on building out the company infrastructure and solidifying the company team with new hires. But in 2016, he’s going to take it easy—he expects to travel only 50 percent of the time, so more like 15 days instead of 20. “I’m one of those people who believe there’s no substitute for face-to-face meetings and being on the ground experiencing markets and understanding customer needs,” he says. “I don’t believe you can really be an effective leader, at least in the gaming supply sector, from sitting behind a desk.” Connelly has practiced what he preaches during his 23 years in the industry. During a long tenure at then-Bally Technologies, he served in several roles, including vice president of international, vice president of gaming operations and with the company’s executive committee as senior vice president of M&A and business development during the time Bally acquired SHFL and through Scientific Games’ acquisition of the company. Connelly says he relishes his newest role with Interblock. “As I was evaluating my next career step after the sale of Bally, I really wanted an opportunity where I could implement the experiences I have been fortunate to have in gaming and bring those to a more midsize company with growth potential,” he says. “As I walked casino floors both domestically and internationally, Interblock kept popping to the top of my list, and I was fortunate to have the opportunity to be their global CEO.” The first year on the job has been “a great opportunity and challenge,” Connelly says. He focused on three main areas: developing the global opportunity to take the company to the next level; implementing the necessary processes, procedures and metrics to effectively measure performance based on data; and creating a budget tied to a very specific roadmap to optimize R&D and the existing portfolio. The strategies have paid off. “We’re expecting double-digit growth in 2015 versus 2014,” he said. “And we’re forecasting even higher growth levels in 2016, so I’m very proud of the team, and what we’ve been able to achieve.” Gaming is going through an interesting time,

Global Gaming Business JANUARY 2016

Connelly says. “We’re going to continue to see consolidation. We’re going to see some new and emerging companies that perhaps we’ve never heard of before. And I think the market is prime for innovation and some killer applications to drive growth.” Companies on both the supplier and operator sides are going to have to work hard to bring new players to the casino floor, he says. “You’re seeing much more capital being allocated toward restaurants, shopping, shows, entertainment, clubs, which is creating, in a way, a more complicated life cycle for casino suppliers.” Casino operators have certain expectations in return for the investment of those dollars, and unless suppliers can demonstrate good return for that capital, it’s going to become more difficult to compete, he says. “That’s the reason a lot of companies today are really starting to think outside the box. We’re going to have to raise the bar if we’re going to remain relevant into the future.” While it’s harder than ever to get new customers onto the casino floor, Interblock’s products are attracting play. “We’re very fortunate that the electronic table game segment within the casino sector is experiencing double-digit growth globally, and we attribute that to the fact that although it’s not a traditional table game it does seem to cross demographic barriers,” bringing in traditional slot players who may be intimidated by live games and younger customers from the millennial generation who are prone to screen technology and are generally more likely to give a table game a try, he says. The company continues to invest in R&D for not only its core products, but also new concepts, such as the Pulse Arena shown at G2E 2015, “where we’re not only taking a product such as an electronic table game, but we’re wrapping it in an environment designed to pull people onto the casino floor as they walk by,” says Connelly. Connelly predicts casinos in 2016 will start to evolve areas of the casino floor to add different experiences, and Interblock looks to make the most of those opportunities. “In order to create a greater momentum for the ETG segment within casinos, we’re going to start offering new ways to provide greater entertainment to the players, and in return increase that hold percentage so we can encompass a greater percentage of the casino floors and ship share for 2016 and ’17.” —Marian Green

RISING

WITH THE

SUN

Kara Fox-LaRose Assistant General Manager, Mohegan Sun at Pocono Downs

n 1996, when the Mohegan tribe opened its first casino in Uncasville, Connecticut, Kara Fox-LaRose was there. She’ll also be there in October, when the U.S. gaming juggernaut marks its 20th year in business. As one of the longest-serving employees of the trailblazing enterprise, Fox-LaRose is a trailblazer in her own right. “I’ve been fortunate; my career evolved as Mohegan Sun evolved,” says the tribal member, now assistant general manager of Mohegan Sun at Pocono Downs in Wilkes Barre, Pennsylvania. “In 14 years at the Connecticut property, I saw it go from a locals casino to a world-class destination, with more than 60 shops and restaurants and a gorgeous 10,000-square-foot arena that’s ranked among the best in the world.” As gaming becomes ubiquitous throughout the Northeastern U.S., the Mohegan Tribal Gaming Authority hopes to work the same kind of magic in the mountains of Pennsylvania. Pocono Downs is in the midst of a multi-year, $1 billion-plus expansion that has already added a hotel and convention center, and may eventually include a retail outlet, water park and sports complex. Fox-LaRose, who oversees all nongaming operations, is at the center of it all. “Our visitation is about 60 percent local, and we have expanded our outer market reach to about two hours from the property,” a radius that includes Philadelphia and New York, she says. “Though gaming is the core of our revenue stream, we’re not just a casino. Introducing the new amenities, we expect to see the property really flourish. We’ve been doing very well.”

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TESTING TECHNOLOGY Patrick Moore Senior Director of Client Services, Gaming Laboratories International

Like most businesses, the sovereign enterprise faced fierce headwinds during and after the Great Recession. By 2012, the MTGA was $1.6 billion in debt, and revenues at the flagship property had dropped by double digits. The leadership responded with rigorous cost cutting and targeted expansion that have contributed to stronger financials. As MTGA President Bobby Soper commented in late 2015, “We have a lot of positive momentum. Profits are increasing, debt has been declining. We are in a growth mode.” “We are on two paths, looking both to deleverage and grow our organization, domestically and internationally,” says Fox-LaRose. The MTGA has proposed what would be a historymaking alliance with its longstanding competitor, Foxwoods, in Massachusetts. It is pursuing its first venture outside the United States, a proposed $1 billion integrated resort in Incheon, South Korea. And last summer, it established its online presence, Mohegansun.com, through its Resorts Atlantic City property. For Fox-LaRose, gaming is in the bloodline. She is the daughter of the late Jimmy Fox, onetime director of arena operations at the flagship property in Connecticut and a tribal legend for whom the arena concourse is named. Over more than two decades in the industry, she has worked alongside luminaries like Soper and CEO Mitchell Grossinger Etess. “I’ve been fortunate to be around such supportive individuals—down-to-earth, genuine, transparent people who truly embrace the Mohegan mission and culture, which is to contribute to the viability of the tribe for generations to come.” Today, as she works to “master-plan the future” in Pennsylvania, Fox-LaRose says, “We have succeeded and overcome a lot of hurdles over the years, and it’s the team that pulls it all together. “We’ve weathered every storm, including the recession of 2008 and increased competition in the industry, in particular in the Northeast where we reside. We have a strong financial standing, which has allowed us to grow. I’m proud to be part of culture like that. And I’m excited to help lead the team of such a successful, amazing organization.” —Marjorie Preston

resh out of a small New Jersey technology school, Patrick Moore landed his first real job in 2002 with a growing company called Gaming Laboratories International. Back then, Moore wasn’t all that familiar with gaming. “I really didn’t know anything about the industry at the time,” he says. The company was looking for test engineers with programming backgrounds, and one thing Moore did know about the Toms River, New Jersey, firm was that it was poised for significant growth. So he took the job, starting work a few weeks before the company moved into new, much larger headquarters in Lakewood, New Jersey. He recalled the tight conditions at the old building and his first workstation—a terminal from a multi-station electronic table game. “That was my desk, and I had to write on kind of a monitor, which was pretty interesting,” he notes. Fast-forward 13 years and Moore has worked his way up to senior positions within the company, first as senior director of technical compliance and now as senior director of client services. Along the way, he got a first-class gaming education, as he joined the engineering group at the right time as slot games were starting to evolve more than they had in decades. “You were seeing multi-games, and multiple pay tables and new bonuses, and so it was definitely an interesting time,” Moore recalls. With the technological changes came also an evolution in GLI’s then-largely administrative quality assurance group. “They recognized that the industry was really changing and getting more complex,” and that the QA group needed to evolve to become more technical. Moore was tapped to help form a new technical compliance group. Moore stayed in compliance until about six months ago when he took over his current role. “A large part of my career has really been regulatory-focused, trying to understand the requirements of all the markets, what was allowed, what wasn’t allowed and how new technology fit,” he says. All that past experience serves Moore well in his new role. “It’s my job to really understand all of our clients and how they integrate with GLI,” and to explore ways GLI can be a better partner. One example is GLI’s efforts to become more efficient in how it conducts testing of new games. “We’re focusing strongly on test automation. What that will allow us to do is more testing than we are today, and to do it much faster.” With game shelf lives shortening, getting a game to market faster is more important than ever, Moore says. “So, we’re trying to find ways to create those efficiencies,” he says. “In some cases, we’re getting involved earlier in the process, sort of precertification testing or quality assurance testing before the formal submission. The goal is (to help suppliers) get more games through the first time.” Moore says he is motivated by his work helping clients take their products to the next level. What keeps him up at night is thinking about challenges to the industry as it strives to win new customers without alienating core players. “You hate to think of a time where the industry isn’t relevant anymore. You want to see it continue to be vibrant.” Moore says the industry is stepping up to deliver games with great potential, as exhibitors at the 2015 Global Gaming Expo showed. “We’re seeing where people are trying to take really popular social games and monetize them. We’re seeing pinball concepts. Games where you can immerse yourself into virtual events and depending on how you do, you can win some kind of award.” GLI is looking forward to seeing Nevada’s technical standards for game types made possible by Senate Bill 9’s passage last year, Moore says. “Nevada’s going to obviously have clarity about what suppliers and operators are going to have to do to operate in Nevada,” he says. “It’s our job for a lot of other markets to start having that discussion. We do that by creating a draft standard and sending it out to the industry for review and comment.” Moore says skill games will likely hit gaming floors in Nevada and other jurisdictions in 2016. It will be only the beginning, he predicts. “We just have to hope that it’s the shot in the arm that the industry needs.” —Marian Green JANUARY 2016 www.ggbmagazine.com

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THE NUMBER CRUNCHER Adam Krejcik Partner, Eilers Research

ounded in 2013, Eilers Research has become the go-to authority on emerging online gaming products thanks in large part to the work of Adam Krejcik, a partner at Eilers, and the man who heads up the firm’s digital and interactive division. Krejcik’s initial focus with Eilers was almost exclusively social gaming, and his quarterly social casino tracker remains one of the top research notes in the industry. In early 2014 he found himself outside his social gaming comfort zone, a market he covered for several years as an analyst at California-based investment firms, and immersed in a new emerging industry that offered Eilers the chance to be a first mover and the foremost authority on the subject. As Krejcik explains, “There are these little kinds of segments within gaming that we thought were underfollowed by some of the bigger firms.” Krejcik’s work on one of those segments, daily fantasy sports, would thrust Eilers into the spotlight, and turn Krejcik, already an authority on social gaming, into one of the most high-valued voices in DFS. Interestingly, the opportunity nearly passed him by. “We really didn’t start looking at DFS until early 2014, and it was mainly inbound, as clients were calling us and saying, hey, what do you make of the

HERE AND NOW Chris Gumiela Vice President of Marketing, Monte Carlo Resort & Casino

imble” and “strategic” are two words that come up often when Chris Gumiela describes traits key to his role as vice president of marketing for Monte Carlo Resort & Casino in Las Vegas. Gumiela previously worked in marketing and business development positions at the corporate level at MGM Resorts International before taking over his current position in 2014. “What I learned in that role is that you really had to be prepared and make sure you thought about the ins and outs of situations so you could be nimble when anything came up that would change the environment in any way, shape or form.” At Monte Carlo, Gumiela says, those lessons serve him well, even in a property-level environment that often demands more immediate decisions. “You have guests around you who are playing slots, buying food and beverages or requesting something, and you have to be very nimble, but you have much less strategic time,” he says, adding that you still must ensure that “you are very opportunistic in your thought process to say ‘what if this happens,’ ‘what if that happens,’ so you then have a contingency plan.” Gumiela came to Las Vegas in 2006 straight from the University of Pennsylvania, where being strategic and nimble also likely helped him as a tight end and wide receiver for the college’s sprint football team. He started with then-MGM Mirage’s Management Associate Program and worked in multiple slot marketing positions at Mandalay Bay casino-resort. Later, Gumiela took on multiple roles with corporate oversight, including various marketing roles and later business de34

Global Gaming Business JANUARY 2016

daily fantasy sports stuff?” he says. “That’s what prompted me to do the white paper last year.” As a boutique firm, Eilers was willing to explore DFS, whereas larger firms may have viewed DFS as a time and money sink—a prudent decision they are likely regretting. “As an analyst we strive off data, the more you can give us the better,” Krejcik says. “When you have private companies or unregulated markets, there’s less to look at, so you have to start making comparisons to other industries, and you have to talk to the companies themselves, and do a bottom-up analysis.” As Krejcik would explain, building these bottom-up models for an industry like DFS requires more work than the top-down analysis performed in established regulated markets like Nevada. The plus side is there are fewer people doing that work, and in the case of DFS, only Eilers which has built out a model. And it’s a good thing they did, as DFS has gone from niche to front-page headlines since Krejcik’s white paper was first published. And while the ongoing DFS saga will keep Krejcik busy in 2016, don’t be surprised to see his name, or that of Eilers Research, pop up in yet another new emerging market. —Steve Ruddock velopment and strategic initiatives to develop the gaming floor of the future. Gumiela got plenty of experience working on corporate projects regarding mobile gaming technology and gaming technology initiatives. In his current role, he also focuses on leveraging new technology, particularly mobile technology, to enhance the guest experience on the hotel side. On the gaming floor, the advent of skill-based gaming will create options that may appeal to guests not interested in the current offerings, Gumiela says. “There’s a lot of opportunity,” he says, “and I think there’s going to be a little bit of trial and error.” Consumers’ rapid adoption of new technology also has created high expectations, he adds. Customers, he says, want their travel amenities aligned with what they experience at home. “It’s that element of choice and personalization that has been the focus with technological advancements, whether it’s getting Netflix streaming to your television or just having Bluetooth so you can play your Spotify list,” says Gumiela. The coming year promises to be a big one for Monte Carlo, Gumiela says, with MGM Resorts’ opening in April of its new 20,000-seat arena and The Park, a unique, vibrant outdoor space with common spaces, dining options and dynamic entertainment. In addition, the Monte Carlo is adding a 5,000-seat theater by the end of 2016, and has already revamped its Las Vegas Strip-facing façade to create an open-air plaza with dining and entertainment. “We’re going to have a great opportunity at Monte Carlo,” he says, to capture new visitation from guests who choose to stay at Monte Carlo while they’re attending an arena show and increased foot traffic into the casino from the arena and The Park. These days, readying for the opening keeps Gumiela plenty busy. “It’s a lot of preparation, a lot of planning, a lot of conversations about how we need to operate in the future,” he says. “We’re always looking at everything, just trying to make sure that we’re ready for the ever-changing needs and desires and wants from our guests.” —Marian Green

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ROCKIN’ IN THE FREE

THE SKY’S THE LIMIT Maureen Sweeny

WORLD

Chief Commercial Officer, Aristocrat Technologies

Jon Lucas

Executive Vice President of Operations, Hotels & Casinos, Hard Rock International

anaging the operations of multiple hotel and casino properties is enough responsibility in itself, but when you add the iconic Hard Rock brand, its legendary music memorabilia with a value in the tens of millions of dollars, and rapid international market expansion, it is easy to see why Jon Lucas has big responsibilities in 2016. “There is now a responsibility for gaming properties to be a leader throughout the entire community, and not just our industry,” says Lucas, who previously managed Hard Rock’s Northfield, Ohio racetrack and casino. “It is something that has changed in a good way, and I learned that lesson firsthand at Imperial Palace when we helped in rebuilding the Gulf Coast after Hurricane Katrina.” It is this wide array of professional experiences that Lucas is drawing upon to successfully execute Hard Rock International’s 2016 strategy, which includes opening new properties in Dubai and Shenzhen, China. “Our main focus in 2016 is to grow our hotel and casino division from a management company standpoint,” says Lucas. “We are going to continue to work with our business development department to get deals to the finish line to add to our portfolio.” Lucas anticipates that Hard Rock International will introduce four or five hotels to the market in 2016, whether it be new properties like in Dubai and China, or converted casino properties in the domestic market. “With the casino market being so saturated, your properties need to have differentiators onsite to draw guests away from the competition,” says Lucas. “We are fortunate that entertainment and music are in our DNA, which helps makes us a true destination resort.” An important part of Hard Rock’s destination experience is making sure that their food and beverage establishments offer premium dining options and service, and do not act as just a loss leader to attract guests to the casino. “Our restaurants need to operate as profitable stand-alone entities,” says Lucas. “There are so many choices, you have to give guests a reason to choose you over the competition.” Despite his competitive nature to create distance between his Hard Rock properties and their peers, Lucas enjoys the acceptance the entire gaming industry has received in the last two decades, which has provided the backdrop for Hard Rock International’s anticipated 2016 activity and acquisitions. “We take pride in the legitimacy of our businesses and the active roles and responsibility we take in our community,” says Lucas. “We like to lead by example and create a positive environment for everyone around us.” —Rodric Hurdle-Bradford

Global Gaming Business JANUARY 2016

n a 2014 column in the pages of this magazine, Maureen Sweeny shared a story from her early career with IBM. After being passed over for an executive role, Sweeny took a meeting with her division manager. She opened it by saying, “I have a headache.” When the man offered her an aspirin, she said her headache came from hitting her head on the glass ceiling. The anecdote says a lot about Sweeny: her drive, her dauntlessness and her appetite for challenge. During a distinguished 30-year career with the U.S. tech giant, Sweeny shattered the glass ceiling, and went on to serve businesses as diverse as telecommunications, financial services, manufacturing, utilities, media and entertainment, and industrial sectors, both in the U.S. and abroad. She brings the same agility to her present role as chief commercial officer for Australia-based Aristocrat Leisure Ltd., where Sweeny is in charge of Class III sales and global marketing. The native New Yorker, now based in Las Vegas, makes regular jaunts to her company’s base camp Down Under, and covers a global territory that is literally as big as the map, and includes Australia and New Zealand, Asia Pac, the Americas and EMEA. Sweeny knew little about gaming in 2014, when she was recruited by Aristocrat. She was unfazed by the learning curve. “One of the fun things about working for a tech company that serves multiple industries is you get to adapt and apply whatever you’re offering to different business opportunities and problems. At the end of the day, Aristocrat is a technology company; we make outstanding software that creates great games, and outstanding hardware in the form factor of cabinets,” she says. “The biggest task for me at the outset was learning what makes a great product, and what players like and don’t like,” along with the nuances of each jurisdiction and the evolving demands of contemporary players. Working closely with Aristocrat CEO Jamie Odell, Sweeny has helped propel the company to new levels of growth, especially in North America, where the company has seen big success in the leased-game segment with titles like Games of Thrones, Sons of Anarchy and The Big Bang Theory. Aristocrat’s greatest hit thus far may be The Walking Dead, a hands-down winner among fans of the TV blockbuster, and the No. 1 choice of many game critics in 2014, its debut year. In addition, to help its customers lure a younger generation of players, the company has developed double cabinets that offer a more vivid, immersive experience, and multi-player models, designed for greater social interaction. From a game design point of view, Sweeny says, the company’s crack creative team continues to turn out products to appeal to a wide range of players, “from the core gambler who likes the very volatile math that’s the heritage in our Australian games, to players who like to chase a jackpot, to folks who like entertainment-style games and would rather spend more time with less volatility on a game. We are really creating games that are relevant for any kind of player, no matter their age, their demographic or the type of gaming experience they’re looking for.” Asked about her goals for the coming year, Sweeny says, “Staying very close to our operators, understanding the challenges they face, and helping them achieve greater success. These aren’t new goals, but a continuation of the work we’ve always done.” —Marjorie Preston

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NEW LEADERSHIP Cody Martinez Chairman, Sycuan Band of the Kumeyaay Nation

outhful exuberance and veteran seasoning are rare qualities for a 34-year-old. Yet, they both describe Cody Martinez, the chairman of the Sycuan Band of the Kumeyaay Nation near San Diego. The group marked 32 years in gaming in November. Martinez was elected late in 2014, succeeding the longstanding former chairman, the well-respected Danny Tucker. Martinez recently negotiated a 25-year compact extension with the state of California, which will likely enable the tribe to expand gaming operations and open a hotel. The added flexibility may prove valuable in light of imminent nearby competition from the Jamul Indian Village of the Kumeyaay, partnering with Penn National Gaming for a nearly $400 million casino launch expected this summer. The development gives Martinez mixed emotions. “On one hand, we are excited for the tribe because we have known them for many years and there has been a family history before gaming,” Martinez says. “On the other side of the game, Sycuan may absorb the greatest impact because of this. There would be nearly a 100 percent overlap of our competitive market share. The competitiveness of our casino is the No. 1 priority, driving the economic engine for the tribe. We had some expansion ideas that we put on the shelf in 2008 that we may now be looking to take off the shelf.” Martinez has seen the tribe’s development from varied perspectives. He grew up on the Sycuan Indian reservation, and worked on the gaming commission and as tribal treasurer before being elected chairman. As treasurer, he guided Sycuan

through the Great Recession that shaved industry revenues by about 30 percent. Like other business executives, Martinez was forced to cut costs and eliminate jobs during the down time. In the tribal world, however, that’s comparable to laying off family members. It was difficult, he recalls, but the moves kept Sycuan viable. Hiring has risen amid the recovery. Through it all, Martinez juggles opposing views from the conservative older generation and the more aggressive younger set. Against that backdrop, the area population grows. “It’s important to gather all the facts and not make any knee-jerk reactions to anything,” he indicates. “We are hit with so much information, from commission regulations to employees, customers and normal investigations, that you have to navigate smartly. One of the hardest tasks in gaming, for me in the tribal world, is taking a political family environment and setting it aside for the good of all.” Before becoming chairman, Martinez worked for the tribal community development department. He played an instrumental role in developing new infrastructure for residents of the reservation by guiding an $18 million capital project and securing federal grant funds. Martinez helped create a first-in-thenation Natural Resource Management Plan for nearly 1,500 acres of land acquired by the Sycuan Band. Through this plan, Sycuan entered into unique partnerships with the county of San Diego, the U.S. Fish and Wildlife Service and the state of California to preserve and protect sensitive wildlife habitat while ensuring the tribe’s future stability via economic development. —Dave Bontempo

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MAYOR OF

DOWNTOWN Derek Stevens Co-Owner and CEO, The D Las Vegas

erek Stevens is passionate about Las Vegas. He says that’s because of the feeling he used to get while flying into Vegas from his native Detroit, where he made a fortune in auto parts. “I can remember starting to get excited about an hour out,” he says. “The adrenaline would start flowing, and by the time you get to the casino, you’re ready to have fun.” And “fun” is the centerpiece of Stevens’ two casinos in Downtown Las Vegas, the Golden Gate and the D Las Vegas. “We use that word in all our marketing,” he says, “because that’s really what it’s all about.” When Stevens and his brother Gary arrived in Las Vegas, they decided to get into the business of fun. They bought a small piece of the now-closed Riviera, and then purchased a half-interest in the Golden Gate, the oldest casino in Las Vegas. Stevens began his gaming education. “It was a great time,” he says. “I spent time with the slot and table departments, understood how a hotel runs.” By 2010, Stevens was looking around for other opportunities, and focused on Downtown. “It was an exciting time then,” he explains. “There was a new city hall, the Smith Center for Performing Arts opened, Zappos was moving their corporate headquarters Downtown… I really wanted to grow Downtown. So when the opportunity to buy Fitzgeralds came up, it allowed us to grow in scale a bit, combine some of the management functions between the two properties, and increase our marketing budget. We’re now at one end of Fremont Street to the other.” Stevens became known for his big events and his interactivity with social media—going, in a sense, viral. Howard Stutz of the Las Vegas Review Journal described Stevens as “part Downtown Las Vegas historical gaming figures Benny Binion, Sam Boyd and Jackie Gaughan, coupled with the showmanship of Steve Wynn and Bob Stupak, while adding in 21st century technology.” Stevens certainly has a flair for the dramatic. The centerpiece of the D Las Vegas is the “Long Bar,” which is just what it says. The Long Bar stretches 100 feet, the entire width of the casino. Huge TVs

Global Gaming Business JANUARY 2016

hang behind the bar, giving visitors views of every sporting event imaginable. “When we were planning the D, I knew I wanted to create a signature feature,” says Stevens. “The Long Bar builds that energy and excitement from the moment you walk in. Sports is a big part of any casino experience, so fortunately there are great sports events on 365 days a year.” The Las Vegas Club was a surprise purchase, even for Stevens. After earlier negotiations broke down, Stevens was motivated by plans by the previous owners to install a mega-drug store there, giving Fremont Street visitors ready access to liquor outside the casinos. So Stevens isn’t sure what he’s going to do with that property. “It’s still early in the process,” he says. “There will be a combination of demolition, rehabilitation, new construction… We’re not even at the design phase at this point.” For Stevens, the “fun” aspect of gambling continues to drive his marketing and the gambling experience at his properties. To do that, however, players have to win sometime. “I don’t compete with anyone else based on what slot machine we offer,” he says. “Win or lose, they’re going to have a great time at our place.” He says it’s important for people to win. “If you’ve come to Vegas and gone home a loser five straight times,” he says, “do you think you’d book a return trip anytime soon? No, so we always celebrate winners here. We make a big deal about it, take pictures with them. We need to encourage winning.” Stevens has his hands full. Along with the Downtown Las Vegas Event Center, an open-air festival ground behind the D, he’s now taken over full ownership of the Golden Gate and is evaluating what to do with the Las Vegas Club. “We’re going to be pretty focused on these things,” he says. “And the D is still in its infancy, so we’re still learning.” —Roger Gros

GOING

MOBILE

David Wolmetz Senior OEM Technology Sales Leader, Casino Gaming & Lottery Applications, Zebra Technologies

avid Wolmetz is peering into the future of gaming. Wolmetz handles gaming and lottery OEM solution sales for Zebra Technologies, moving there when Zebra acquired his former company, Motorola Solutions, Inc., last year. Traditionally a printer company, the new Zebra is a forward-looking vendor supplying wireless network and location-enabling technology and components to a number of industries, including health care, retail and transportation as well as gaming. But in applying the technology to gaming, Wolmetz has a clear vision—a system that enables operators to know where their customers are within a property and tie that information into the back-end systems that hold the opted-in profile data on each customer. In addition to wireless infrastructure, Zebra manufactures barcode readers, RFID, mobile computers, printer systems and other hardware to accomplish that vision, and helps OEM manufacturers and partners work the new capabilities into digital ecosystems of their casino operator customers. Zebra calls it “enterprise asset intelligence,” which, according to Wolmetz, allows operators the ability to see “assets” in the ecosystem—players, hosts, service employees, slots, table games, digital signage—in real time, and to use existing database information to serve them better. “We’re giving a digital voice to the physical

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world,” Wolmetz says. “It involves connecting things to the cloud, so you can manage, analyze and make real-time operational efficiency or consumer experience decisions based on those elements that are connected. We can tell with our locationing-capable infrastructure where things are so a marketer can link a product to a customer in real time.” In a casino, that means not only knowing who a customer is before he or she walks in the door, but also where that customer is inside a facility, using geolocation technology. “When you know those things, you can optimize your operations and deploy your associates effectively to cater to that person, so the guest has a better experience,” says Wolmetz. “Their experience can be enhanced through targeted incentives to play a particular game they may be interested in, eat in a certain restaurant, etc.” Zebra works with customers to integrate the hardware it manufactures, such as a mobile enterprise tablet tied into back-end systems, into a wireless ecosystem that provides them information and an opportunity to make decisions on how best to market to that customer in real time. According to Wolmetz, this next-generation system combines back-end data with indoor and outdoor location capability and pushes and pulls that information from a mobile device, or even a player card with tracking ability. “Operators can actually physically locate people as it relates to their total spend, including gaming hospitality and retail,” he says. In addition to marketing, Wolmetz envisions a shift to phone-based payments in casinos, enabling transactions that are now commonplace in retail locations such as Starbucks. “Our technology enables movement of cash around the facility with a mobile device,” he explains. “Zebra makes barcode readers, small scan engines that take a picture of a barcode. We enable it with scan engines at different touchpoints around the casino.” He says it is one way that casinos will ease the millennial generation into their businesses, by giving them mechanisms on the mobile device with which they are already familiar. Wolmetz says Zebra is quickly moving ahead on this journey, reaching out to the OEM manufacturers who produce casino management systems, patron management systems and to their end users, the casinos. Over the next three years, Wolmetz predicts the industry will adopt standards that allow a wealth of different capabilities using mobile devices, as well as different cashless scenarios for casinos. Regulations will have to be worked through in many instances, but the result is sure to be a revolution in how casinos market to and serve their customers. —Frank Legato 40

Global Gaming Business JANUARY 2016

THE

RAINMAKER

Nicholas Menas Executive Vice President of Corporate Development, Amaya Gaming

n 2016, almost five years after the U.S. gave online gaming the bum’s rush, PokerStars is preparing a comeback—in the one of the most stringently regulated markets in the nation. Last year, the New Jersey Division of Gaming Enforcement cleared the way for Amaya Gaming’s $4.9 billion-dollar baby—the world leader in online real-money poker—to return to its digital air space. Some say the landmark decision might have been indefinitely delayed without the persuasive powers of Nicholas Menas, Fox Rothschild lawyer and Chris Christie intimate, now executive vice president of corporate development for Canadian-based Amaya, owner of both PokerStars and Full Tilt Poker. When the big news broke in October, poker maven Nolan Dalla called the reentry a “space-race, flag-plant, Neil Armstrong moment in poker on planet USA.” Menas, who successfully argued the case before the DGE, says it was one small step for poker, with the potential to be a giant leap for the whole industry. “I do think it’s a monumental achievement, but it’s not specific to Amaya,” says Menas, who also helped MGM Resorts regain its license to operate in New Jersey—and reclaim its 50 percent interest in market-leading Borgata. “If you look where the industry is going, online is the key to the future”—and could also prove to be the best solution for struggling brick-and-mortar properties. As Borgata CEO Tom Ballance has noted, up to 90 percent of that casino’s online customers have never visited that glistening gold tower overlooking Atlantic City’s Marina district. The challenge, says Menas, is to take online gaming, which has been perceived as a threat to land-based operations, and turn it into a marketing and acquisition tool. “What online gives us the opportunity to do is to take that

brick-and-mortar brand, cross-market it to a different customer, and tap into a whole new market.” Online gaming may have been slow out of the gate, but its growth is inevitable and its impact immeasurable, Menas predicts. “Pennsylvania is sending all the signals it has the will and desire” to legalize online gambling, he says. “And New York is paying close attention to Pennsylvania. As the legislatures get younger and younger, federally and in the various jurisdictions, you’re going to see the evolution. The marriage between online and bricks-and-mortar casinos is not only inevitable, it’s necessary” to protect billions of dollars in investments by the casino companies as well as the communities they serve. The proof is in the profits. One example is the Atlantis resort in the Bahamas, where the annual PokerStars tournament is consistently one of the best weeks money-wise for the resort. “We build a network online, we provide a product online, and then use that online product to say oh, by the way, come visit this location and enjoy an exceptional week at the Atlantis,” says Menas. “This is a partnership, and one that’s here now.” He also contends that online gaming is not a black hole of anonymity where lurking online predators fleece their customers. “Digital is traceable. Every time somebody goes online, whether on a mobile phone, a laptop or desktop, they are leaving a digital trail.” Such visibility will make it easier to install and enforce consumer safeguards, ensure accurate customer geolocation, protect against money laundering and even help identify problem gamblers, he says. “My message is simple,” Menas concludes. “There’s commercial activity going on in jurisdictions all across the country and around the world where online is not legalized, licensed and regulated. Here I am, a company that wants to be completely transparent, wants to be licensed, wants to be regulated and is willing to pay its fair share of taxes to provide entertainment to a consumer base that is already playing,” in many cases illegally. “We’ve put our money on the table,” he says. “It’s not serving the states or the interests of the individual players if they don’t know who they’re playing with.” —Marjorie Preston

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LUCK

prise opened, the tribe has become the largest employer in the area, with more than 4,000 employees and an annual payroll of $157 million. The organization has not relied solely on gaming for its fuAngela Heikes ture; its portfolio includes reChief Operating Officer, tail, convenience and food Shakopee Mdewakanton Sioux stores, an 18-hole golf Community Gaming Enterprise course, a water bottling industry, a recycling facility n 2016, Angela Heikes will take and other assets. the helm of one of the most prosHeikes is a non-tribal perous and influential tribal gaming member with decades of exorganizations in the U.S. As the future perience in tribal gaming and president and CEO of the Mdewekanlegislation. She is the former comton Sioux Community Gaming Entermissioner of corporate affairs for the prise, Heikes can look forward to a Mille Lacs Band of Ojibwe, which future rich with possibility. owns two casinos, and also worked It’s a future she helped design. for Grand Casinos, Inc. in jurisdicIn 2012, Heikes authored a 20-year tions including Louisiana, Minnesota master plan for the community, which and Mississippi. She joined the operates the Mystic Lake and Little Six SMGC Gaming Enterprise in 2011, casinos in Minnesota’s Twin Cities reas executive vice president of adgion. That plan included a 10-year, ministration. $75 million partnership with CanShe will take the top spot at a pivotal terbury Park that turned the nearby juncture for the industry in Minnesota, which racetrack from a competitor into an has considered commercial casinos as a way to really. It also includes the development of a $105 plenish government coffers. She is known as an million luxury hotel at Bloomington’s massive Mall of America, which attracts 40 million visi- impassioned and informed voice against new competition in a state where gaming is “fully mature tors per year—as many as the city of Las Vegas. “The most challenging part of my job is en- and saturated.” Tribal gaming “has bolstered the local suring that our enterprise stays relevant—attracteconomies where the casinos are located, most ing the next generation of guests, keeping our often in rural and remote areas, by providing wellgaming offerings engaging, providing the right amenities and finding new ways to provide excep- paying jobs with good benefits,” Heikes says. “Expanded non-tribal gaming would reverse the tional service are top priorities,” says Heikes. progress Minnesota tribes have worked so hard to “These are critical to keeping our operations viachieve for themselves and for their communities.” able so we continue to do what our enterprise is On October 1, Heikes will succeed Ed Stevenintended to do: support the tribal government son, who has served as CEO since the mid-1990s. we serve.” In 2012, the Shakopee Mdewekanton made She looks forward to the challenges that await, but international headlines with a report that each of says Stevenson will be “a tough act to follow. its members was likely a millionaire many times Under his leadership, the SMGC Gaming Enterprise has grown into the largest, most successful over, thanks to casinos. A New York Times report, noting the impact of market saturation and casino resort in the Midwest,” she says. “Ed has led with vision, passion and purpose.” the specter of online gaming, hinted that the Stevenson returns the compliment. “As I come tribe’s prosperity would endure if its “luck held to the end of my 20-year career,” he says, “I’m exout.” cited that Angela Heikes will carry on the progress As Heikes would undoubtedly argue, the we have made. She will work with our team memtribe has never relied on luck. In 1969, after generations of enforced hardship and poverty, it bers to move the gaming enterprise to a new level of performance.” It’s all part of the plan. earned federal recognition and never looked —Marjorie Preston back. Since 1982, when its first gaming enter-

IS NOT AN

OPTION

Global Gaming Business JANUARY 2016

STATION MISSION Roger Petterson Vice President of Slot Operations, Station Casinos

s a tennis prodigy growing up in Sweden, Roger Petterson would compete in matches throughout Europe, and on those trips, he would always keep an eye out for the casinos in each city. “I was always intrigued by them, and when I was in Spain or Portugal or Yugoslavia or Monaco, all these places, I always tended to seek them out,” says Petterson, who is now corporate vice president of slot operations for Station Casinos. “They always piqued my interest, so when I came here (to play tennis for UNLV), I opted to go into that field in school, and I never left. It’s been a very interesting industry for me. It never gets dull.” Petterson, a star tennis player while at UNLV and a member of the 1996 UNLV Sports Hall of Fame class, graduated in 1996 with a bachelor’s degree in hotel administration. He set a goal to be able to help open the Bellagio. “It was going to be the new, flashy property for Mirage Resorts, and I wanted to be a part of that project,” he says. Petterson started out in gaming with a focus on table games. “Coming from Europe where table games are king, I thought I would want to be part of table games, so I started working on table games in 1996 and pretty quickly,” he says. After a while, he realized table games weren’t for him. “I started looking at what the slot guys

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were doing out on the floor,” he says. “There were a lot of new games, and a lot of products on the floor, and they’re shifting things around product, and so I gravitated more and more toward that, and I decided to go in that direction. I got accepted in the Mirage management program for slots.” A year and half later when the time came to open Bellagio in 1998, Petterson had achieved his goal—he was part of the team opening the slot floor at the new property, and he had found his career passion. “I love everything about it,” he says. “What makes it fun for me is the ever-changing landscape of slots and the new games coming out, the new technology enhancements, new innovations, new play mechanics screens, new 3D technology and everything else,” Petterson says. Petterson’s career has spanned two decades, including stints with the Mirage, Bellagio and Shuffle Master Gaming. Most of his career, however, has been with Station Casinos, including slot director positions at Boulder Station and Red Rock and corporate director of gaming. One aspect that Petterson enjoys most about his job is the ongoing challenge of an evolving industry. “To me, it’s like playing a chess game, to stay one move ahead of your competition and also your players. The whole goal is to be able to provide the latest and greatest games and make sure they have the most fun at your properties,” he says. To ensure he’s on top of what Station players want, Petterson spends time talking to players on the casino floor, particularly at Red Rock, which is

near the corporate offices. Over time, he has cultivated good relationships with players, who often email and call him to chat and ask about games, Petterson says. “At the end of the day it’s important that the games we offer are the right products, so I want to make sure I stay in close contact with players so we can provide the games they are looking for.” This year, Station Casinos offered a special event at Green Valley Ranch hotelcasino for some of its top slot players. The company invited a group of gaming manufacturers to bring some of their best games to a large conference room and let players try them out. The players loved the opportunity to see and play the newest slots before the games actually hit the slot floor, says Petterson. “It was great from our perspective, and also the manufacturers, to hear from the actual players,” he says. “That was a great event for them to get feedback on their latest and greatest games that hadn’t even been released yet for the most part.” Now, players can’t wait for some of the games make it onto the slot floor. “They’re saying, ‘When are those games coming?’ which is a good thing.” Asked about Nevada’s Senate Bill 9, which allows for skill-based elements in slot games, Petterson says he believes it is a positive direction for the industry and an evolutionary step just like the advent of bill validators and ticket-in, ticket-out in the gaming industry. “With SB 9, it’s going to really open up the opportunity for manufacturers to be creative and offer new play mechanics to take the games to really a level we haven’t seen before, and offer even more variety than we currently have,” Petterson says. —Marian Green

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LEADING

CANDIDATE Kenneth Manuel Assistant CEO, Pathway Mentorship Program, Gila River Gaming Enterprises

ISLAND FEVER

Alan Dunch

he story of tribal government gaming in Arizona is one that brought tribes from rags to riches. But more importantly, the story demonstrates the ability of Native Americans in the state to overcome the disadvantages they may have had growing up to take advantage of the opportunities that gaming provides. Kenneth Manuel is one of those success stories. When the Gila River Indian Community opened its first casino in the early 1990s, Manuel joined the team as an entry-level employee in the slot department. “That was a great place to start,” he says. “You get to know what’s important very quickly and also to know the customers. I learned the basics there.” Manuel started at the first casino opened by Gila River Gaming Enterprises, the Lone Butte Casino, and later held positions at the other two casinos, Wild Horse Pass Hotel & Casino and Vee Quiva Hotel & Casino. His current job is a stepping stone to the CEO position, which he will assume when his current program is completed, but Manuel is in no hurry to get there. He is invested in developing leadership for the gaming enterprises and seeing young members of the Gila River Indian Community advance their careers. “One of the most gratifying programs the gaming enterprise offers is the mentorship program,” he says. “I remember many years back the community wanting to develop this kind of program. This program identifies talented community members and places them in positions where they can learn from a mentor in a specific role. Once the goals have been met, the mentee earns the position they’ve been training for. It’s been part of our business culture for several years.” Manuel says the gaming business is crucial to the tribe, both as a way to develop talent and to serve the tribal community. “The revenues our casinos generate go to support programs such as housing, education, health care, social services, just to name a few,” he says. “So our team members are not only working to support themselves and their families, but also working to support a much larger cause, the Gila River Indian Community.” As such, Manuel says the enterprise keeps an eye on other casinos in the very competitive Phoenix market—including the recent addition of the controversial Desert Diamond West Valley casino in Glendale owned by the Tohono O’odham Nation—but says the Gila River Indian Community is confident in its position. “Since 1994, we’ve been the industry leader in this area,” he says. “We’re always looking to explore but we always keep the eye on the competition while concentrating on what we do best.” —Roger Gros

Global Gaming Business JANUARY 2016

Chairman, Bermuda Casino Gaming Commission

t’s been almost a dozen years that the government of Bermuda has considered legalizing casino gaming in order to attract more tourists to the island nation. But it wasn’t until 2014 that they actually did something about it. And like all legalizing jurisdictions, the first order of business is setting up the regulatory structure. For Alan Dunch, who claims to have known very little about casino gaming before his appointment, the decision was rather simple. “It was an offer I could not refuse,” he says of the invitation by Tourism Minister Shawn Crockwell. “When someone of that caliber asks you to serve, you do.” Bermuda has adopted the integrated resort approach that has made the casinos of Singapore so successful—casinos play a small, but important, role in the overall makeup of the property. While the Bermuda legislature approved three casinos, it left a few things up to the regulators. The Casino Gaming Commission will decide on the overall investment level as well as the tax rate—two things that Dunch knows are inexorably tied together. “As mindful as we are of the goals to attract investment and create employment,” he says, “we recognize that to establish a high tax rate like you see in some of the U.S. jurisdictions would be counterproductive. We understand we need to have a tax rate that makes it attractive for a large casino operation to bring its high rollers and highnet-worth players to Bermuda because there would be more profitability. “In some jurisdictions, it seems the casino operators work for the government. That will not be the case in Bermuda.” Dunch says all the members of the gaming commission have been appointed, and he has hired former casino executive and regulator Richard Schuetz as the executive director. Schuetz was most recently a member of the California Gambling Control Commission. “Having Richard join us has been great,” says Dunch. “He knows so much about the industry that I’m able to get his definitive opinion whenever I have a question.” Dunch doesn’t want to drag out the regulatory process as happens prior to casino openings in the U.S., most recently Massachusetts. “I’m hoping to have regulations concerning potential casino sites in place very soon,” he says. “And then I’m hopeful that the bulk of the regulations that will enable us to accept applications will be in place by the end of the first quarter this year. If all goes according to plan, I hope we can begin to accept applications for licenses by the end of the second quarter of 2016.” Dunch understands, however, that the application process is just the beginning. “Once somebody gets a license, the amount of time it actually takes to get a casino up and running is out of our hands,” he says. With several existing hotels interested in bidding, Dunch says the time required to get the casino open will be only one factor that will be considered. The criteria will always be what will be best for the Bermuda nation. “We will look at all of the applications and judge them according to their own merit,” he says. “The first casinos to be developed in Bermuda are important. They have to get it right and we have to get it right.” Dunch not only has lofty ambitions for a gaming industry in Bermuda, but wants the regulatory system to be respected as well. “We would like to become the model that other jurisdictions look at and want to emulate,” he says. —Roger Gros

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ROLLING ROCK Brian Eby Senior Vice President, Gaming Operations, Rock Gaming

rian Eby’s gaming career has been solid as a rock. And now it’s time to roll. The 46-year-old Albuquerque, New Mexico, native, the senior vice president of gaming operations for Detroit-based Rock Gaming, will be at the forefront of major developments in 2016. The company’s portfolio of gaming and entertainment offerings includes Horseshoe Cleveland, The Ritz-Carlton Cleveland, Horseshoe Cincinnati, Horseshoe Baltimore and Greektown Casino-Hotel in Detroit. Thoroughbred racetracks ThistleDown Racino in North Randall, Ohio and Turfway Park in Florence, Kentucky, are also part of Rock Gaming’s lineup. The company also partners in Caesars Interactive Entertainment Inc., the largest online, mobile and social gaming company focused on casino entertainment. And in 2016, it will renovate and innovate. “This is going to be a monumental year for Rock Gaming as we unveil a new brand at our properties in Ohio,” Eby says. “We also will be completing a $60 million renovation at our casino in downtown Detroit and a $70 million renovation at our racino in northeast Ohio. This is an exciting time for us.” What a time to be a major executive. In November, Rock Gaming said management of the Horseshoe in Cleveland and Cincinnati, along with ThistleDown Racino properties, will transition from Caesars Entertainment by mid-2016. At that point, Rock Gaming will independently own and operate them. The properties will be rebranded with a new loyalty program. After the transition, the Horseshoe properties in Cleveland and Cincinnati, along with the ThistleDown Racino, won’t be part of the Caesars Total Rewards loyalty program. Rock Gaming will roll guests’ current Total Rewards tier status, tier credits and reward credits over to the new loyalty program. Guests will also keep those credits and be able to use them at all Caesars properties outside of Ohio. This transition could become one of Eby’s signature achievements in a rich career spanning two decades in gaming and hospitality. Eby has served in landbased, riverboat and Native American gaming facilities spanning six jurisdictions. He transferred to Rock Gaming in September 2015 from sister property Greektown Casino-Hotel, where he was chief executive officer and general manager. One of his career highlights was tripling a property’s EBITDA over a three-year period. His team parlayed a niche in a flat market into a new focus to improve guest gaming experiences. But Eby measures his professional journey via mentoring, not milestones. “The most gratifying accomplishment in my career has been working with and mentoring talented industry professionals,” he says. “I very much enjoy investing time helping team members develop skills and leadership abilities that will benefit them in their careers and in life. It is truly rewarding to watch those I have mentored achieve their goals, knowing that I played a small role.” What did Eby’s mentors tell him over the years? “Never confuse effort with achievement,” he indicates. “Everyone in the gaming industry works long hours, but it is the meaningful work that makes a difference and leads to success.” —Dave Bontempo

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LEGAL

LANDSCAPE Mark Clayton Gaming Lawyer, Greenberg Traurig

any people may think the scope of work falling to gaming attorneys is limited to traditional gaming-related matters, but that is not the case—nor should it be, according to Mark Clayton, one of the industry’s top gaming lawyers and a shareholder in the Greenberg Traurig law firm. “Regulators continue to believe—and rightly so—that anything that happens within the four walls of the casino is ultimately the responsibility of the gaming licensee,” says Clayton. Take the explosive growth of nightclubs in hotel-casinos, for instance. As hotel-casinos added these venues over the years, some clubs ran afoul of the law, sometimes generating huge fines, and concerned gaming regulators let casino operators know. “The regulators believe those types of behaviors would ultimately bring disrepute to the state, so they decided there was a need to regulate club vendors more closely,” Clayton says. Casino operators now must take a stronger role in monitoring their nightclub venues, including designating an employee, who must be licensed as a key employee, to oversee and monitor the nightclubs. Even as that issue began heating up, Clayton was already boning up on proper nightclub operations, such as security protocol for nightclubs. That’s just par for the course for any good gaming attorney, he says, explaining why it’s important for gaming lawyers to weigh in on topics that at first blush seem to be outside the traditional gaming attorney realm. “We’re involved with everything that’s occurring at the property even if it doesn’t fall within the traditional definition of gaming,” he says. “So, it could be a foreign corrupt practices issue. It could be the number of EMTs at a property. It could be about security protocol. I now know more about nightclubs than I’d ever envisioned knowing.” Having been involved in the gaming industry since the early 1990s, Clayton also has learned much about the gaming industry and gaming regulation over the years. Clayton’s resume includes serving as a member of the

Nevada State Gaming Control Board, and as chief of the board’s corporate securities division. He also has held several positions with gaming operators, such as Showboat Inc., where he was vice president, general counsel and assistant secretary; Aladdin Gaming Holdings LLC and Aladdin Gaming LLC, as vice president and general counsel; and Caesars Entertainment, as vice president of corporate law. Clayton also served as an attorney with Lionel, Sawyer and Collins before joining Greenberg Traurig, where his practice focuses on gaming regulatory matters and gaming legislation. “Mark Clayton is among the very top gaming lawyers not only in Las Vegas and the United States but globally,” Greenberg Traurig CEO Richard A. Rosenbaum said in a statement when Clayton was hired. “He is an exceptional attorney whose background and experience, particularly his roles as a member of the Nevada State Gaming Control Board and as in-house counsel to major gaming companies, will be a significant asset to our clients and our firm,” says Michael J. Bonner, managing shareholder of the firm’s Las Vegas office. For his part, Clayton credits several individuals who have mentored him over the years. Bonner and Gregg Nasky mentored him when he was doing securities work as a young lawyer at the beginning of his career; Bill Bible, chairman of the Gaming Control Board when Clayton was chief of the Securities Division; and finally, Bob Faiss, “who was one of the leading, if not the leading gaming lawyer, of this field. “He was always a gentleman, and the way he practiced law and the way he conducted himself was something I always viewed as something to emulate,” says Clayton, who worked with Faiss at Lionel, Sawyer and Collins. Clayton also is quick to note that many, many others helped and influenced him over the years. “I’ve been very fortunate in that regard,” he says. Looking forward, Clayton says the gaming industry is facing an interesting period. The gaming product will continue to evolve, he says, as new technology emerges, player tastes change and new regulations such as those in Senate Bill 9 allow for skill-based games. “What we’re seeing now is a generational change in the gaming customer, so the industry is going to have to reflect that,” Clayton says. “We just have to remain adaptive.” —Marian Green

Global Gaming Business JANUARY 2016

GOING

INTERACTIVE James C. Kennedy Jr. Group Chief Executive, Lottery, Scientific Games Corporation

ames Kennedy joined Scientific Games in 1985, when the company was one of the main suppliers to what was a still-young but rapidly growing state and provincial lottery industry in North America. Now, as group chief executive of lottery for the end-to-end gaming and lottery supplier that is today’s Scientific Games, Kennedy is poised to usher in a new era for global lotteries. Scientific Games’ lottery division in 2016 is all about the prowess of legacy companies Bally Technologies and Scientific Games in one area in particular—system technology. Ever since Scientific Games acquired slotmakers WMS and Bally Technologies, Kennedy and his team have been developing a new interactive platform that he calls the next generation of lottery technology. The industry will view it firsthand this year in Canada, where Scientific Games is working with the Atlantic Lottery Corporation on a new integrated network. “We’re pulling together a single-wallet, single-execution system that I think is the model for the future,” Kennedy says. “It is a one-stop shop of systems integration allowing the consumer to play across the lottery portfolio, and eventually casino games.” When it comes to Scientific Games’ lottery division, in fact, it’s all about the systems. The company’s leaders, including Kennedy, knew this long before Scientific Games acquired WMS and Bally. After Kennedy took the lottery helm in November 2013, one of

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his first tasks was to combine the system divisions, in a way that would maximize use of the talent already there. That task was accomplished by having the most talented executives essentially switch roles. “We’ve taken key leadership we had in both the gaming and lottery divisions and cross-pollinated across the organization,” Kennedy says. Walt Eisele, who headed up systems technology and game development for Bally, was named chief technology officer-lottery for Scientific Games. Steven Beason, the longtime head of lottery systems and CTO for the legacy Scientific Games, was made enterprise chief technology officer for the new company. “Prior to the acquisition, Bally was the leader in casino gaming systems around the world. Today at Scientific Games, we have a global footprint all the way from China through Europe, and North and South America,” says Kennedy. “Bringing Walt over to the lottery side was a great way to immediately leverage that technology base. Steve, who basically grew up in the lottery business, has been a boon on the lottery side. It’s been a great technology transfer, and we’ve already seen the benefits of it in some of the recent contract wins.” For 2016, the fruits of this technology transfer will be the next-generation platform for ALC in Canada, and similar systems Scientific Games provided for Norsk Tipping in Norway, and will soon create in Denmark. For other customers, particularly in the U.S., Kennedy’s team is working to modernize retailers and serve customers using all available channels.

“For the past three years, we’ve used the interactive platform—mobile, the internet, apps—to create an interactive experience for lottery customers through second-chance drawings, loyalty programs and websites,” he says. “We’re creating strong relationships with consumers using interactive technology.” As convergence of lottery and gaming markets continues this year, Kennedy says the basic priorities of the company’s lottery division remain the same as they were when he started in 1985—integrity and product growth. “The first order of concern in the lottery business: Is it safe and is it fair?” he says. “At the heart of the lottery business is the integrity of the transaction, the sanctity of the bet. Closely following: We’ve got to grow our business. We’ve got to send more kids to school, feed more people… That comes from creating really exciting, meaningful lottery content.” Of course, the merger has provided tons of meaningful content from brands like Bally, WMS, Shuffle Master and Barcrest. “We’re producing 50 billion scratch-off tickets and providing system support and game content to roughly 150 lottery customers around the world, so keeping that engine humming is a key priority,” Kennedy says. “On top of that, you have to be creating new solutions and new content. My focus in 2016 is getting these new-generation systems integrated, getting our interactive platform extended, and—a personal goal— solving some of the retail channel conflict, in which retailers are dependent on the lottery but don’t necessarily have the best tools to operate the business.” Kennedy knows all about operating with the best tools. With Scientific Games, he has the biggest toolbox in the business. —Frank Legato

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How eSports is infiltrating nearly every corner of the gaming industry By Steve Ruddock

The DOTA 2014 World Championship drew more than 10,000 people to Seattle’s Key Arena, with more than 20 million watching online.

Are You Ready for eGambling? o matter what segment of the gaming universe you call home, if you’re not familiar with eSports, it’s time to get up to speed. eSports, which is little more than a snazzy name for competitive video gaming, is big business, and it’s the talk of the gaming world. I’ll steal part of an old comedy bit of Brian Regan’s to sum up the reach and the pervasiveness of the eSports industry in 2015: eSports is fast becoming the cranberry of the gaming world. Like cranberries sneaking into all of the other juices, the booming eSports industry seems to be turning up in one form or another in every sector of gaming. The question is, will eSports be nothing more than the most recent in a long line of failed “next big things” that will transform gaming, or is it really the long sought-after bridge that will bring millennials to brick-and-mortar casinos? What makes eSports different from the previous flavors of the month is that the industry is already established with a tremendous reach, yet provides extreme flexibility in its deployment. The possibilities for eSports integration abound, and are only limited by one’s imagination.

Global Gaming Business JANUARY 2016

Emergence Even though you may just be hearing about it now, eSports is far from a new industry. The roots of modern eSports, the Nintendo World Championships, were first held in 1990 and predate all forms of online gambling. Still, it was the rise of online multi-player games in the early 2000s that thrust competitive video gaming onto a much larger stage. Some 15 years later, the industry has evolved from a niche activity with a public perception somewhere between a Star Trek convention and a Dungeons & Dragons meetup into a multibilliondollar industry with eSports competitors marketed as athletes. It’s a bit hard to wrap your mind around, but millions of people watch other people play video games for hours on end. Not because they called next game, but because it’s entertaining. At any time of the day, and on any day of the week, hundreds of thousands of viewers are tuning in to Twitch.tv’s live streams to watch (and in some cases interact) with their favorite eSports stars in real time. And make no mistake about it, the top eSports competitors are stars, capable of earning seven figures in a given year, as well as another seven figures in sponsorship deals.

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On the industry side, eSports is perhaps even bigger. In the modern eSports world, there are high-profile leagues and tournaments that can sell out 10,000seat arenas in Asia, Europe or the United States in a matter of hours. These events often award multimillion-dollar prize pools to competitors, and have had upwards of 11 million people watching concurrently—a number that dwarfs many major sporting events. The stats for some of these games are jaw-dropping, and are only likely to go up with ESPN now airing eSports competitions, and with Turner Sports preparing to launch prime-time eSports programming in 2016: • The League of Legends 2014 World Championship had a prize pool of $2.1 million, and has garnered over 27 million views, according to MMOs.com. • The DOTA 2014 World Championship produced a total prize pool of $10.9 million, with over 20 million total views, also according to MMOs.com. • The WarCraft spinoff, Hearthstone, has over 30 million registered users. And then there are “freemium” games. Games like League of Legends and its 90 million monthly users have proven to be huge money makers. For those of you who may not know, freemium games are simply free-to-play social games that give the customer the option to purchase in-game items and bonuses to enhance or accelerate their gaming experience. It’s been reported that League of Legends was on pace to make over $600 million from these mini-transactions in 2015, a number that is expected to break $1 billion in 2016. Furthermore, if a game catches on as an eSport, it’s a veritable gold mine for the studio that developed it. Not surprisingly, the top eSport games also happen to be among best-selling video games, and this has been the case for over a decade. From StarCraft and WarCraft, to DOTA 2 and Halo, to Hearthstone and Counter Strike, a game’s standing as an eSport often determines its commercial success, and the success of the inevitable series it will beget. While huge numbers, this shouldn’t be surprising when you consider as of 2013, an estimated 1.2 billion around the globe play video games, or 17 percent of the global population at the time. What should be surprising was eSports’ ability to stay out of the spotlight for so long. But that is all changing.

In addition to these third-party game-mediated betting exchanges, sports books were the first gaming companies to see the potential and latch on to eSports, and in doing so they created the first true intersection of video games and gambling. eSportsbook wagering run by licensed sports betting companies tallied some $300 million in handle last year, from 1.7 million unique customers, according to Grove’s analysis. One of the sports books offering eSports wagers is Pinnacle. At Global Gaming Expo 2015, Pinnacle Head of Sportsbook Marco Blume said eSports was the company’s seventh-largest betting market, and if it continues to grow at its present rate, which he called “unprecedented in his time,” could move into the top five, overtaking major sports like hockey in total handle. It’s not just sports books that see potential in eSports, either. In January 2015, we saw the emergence of daily fantasy eSports (DFeS) with the launches of AlphaDraft and Vulcun. The heavy hitters of the DFS industry jumped on board in the fall. DraftKings added DFeS to their contest offerings, and perhaps to keep pace, FanDuel announced the acquisition of AlphaDraft, and its intention to integrate DFeS into its offerings soon thereafter. The most recent intersection between eSports and gambling is occurring in poker, both live and online, as the industry tries to recapture the appeal it had with twentysomethings a decade ago who now seem to be drawn to Hearthstone over hold ‘em. MediaRX CEO Alexandre Dreyfus is determined to change the way poker is consumed, and in his words, “sportify” the game. His latest project is the Global Poker League, a mashup of traditional televised poker and a number of elements borrowed directly from eSports, complete with live streams, static teams made up of professional players and a live spectator experience. In addition to Dreyfus trying to “sportify” poker, several online gaming companies including the parent company of PokerStars, Amaya Gaming, have indicated they are working on hybrid poker/eSports products. While details are sparse at this time, Amaya CEO David Baazov said the company is developing “a new poker variant targeting the large and growing skilled video gaming community,” during the company’s Q3 earnings call in November. This amalgamations of eSports and gaming products across so many different segments of the gaming world begs the question: Can the brick-andmortar casino industry capitalize on the eSports phenomenon?

Infiltration As is often the case, when people are competing at a high level, the people watching like to have some skin in the game, so it wasn’t long before the fans started betting on these matches, in a variety of different ways. Betting exchanges where in-game virtual items (with real-world value) can be wagered were the first to appear. According to Chris Grove of OnlinePokerReport.com, an Eilers Research analyst, the size of this betting market which he dubbed “game-mediated betting” will reach $2 billion in 2015, with some 3 million unique customers. 52

Global Gaming Business JANUARY 2016

Potential Casino Integration As noted above, there are many ways to incorporate eSports into existing products, or create an entirely new revenue stream. eSports can be played online or in person. It works on its own, as a ticketed event capable of bringing thousands of potentially new customers to the casino. eSports can also be integrated into existing casino products (online and brick-and-mortar), from slot machines to poker. Or a casino could opt for a lighter footprint and simply focus on the gambling side of eSports—adding

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eSportsbook or daily fantasy eSports products, where allowed by law. Nevada sports books can offer lines on eSports contests, and the New Jersey Division of Gaming Enforcement has stated that casinos and racetracks in the state can offer DFS (and therefore DFeS) contests to their patrons. Yet another way a casino could capitalize on the popularity of eSports (which is incredibly high among the millennial demographic casinos are struggling to attract) is to host eSports tournaments. In August 2013, the League of Legends Finals sold out the Staples Center in Los Angeles (some 8,000 tickets) in less than an hour. If casinos are really interested in marketing to a couple thousand millennials, holding an eSports event seems like a pretty good option.

The Underside of eSports ESports are not without their risks. The industry, despite its age, is extremely fragmented, with competing leagues, some with dubious reputations, all over the globe. Because of this, there are no standardized rules for eSports competitions. The industry also faces regulatory hurdles in certain jurisdictions, particularly when it comes to the betting products that go hand-in-hand with the matches. For example, with sports betting illegal outside of Nevada, eSports startup Unikrn, an eSports betting exchange, can only offer U.S. residents freeto-play missions that unlock achievements. Speaking of the pervasiveness of betting, the industry has long been dealing with a number of match-fixing scandals and rumors. While the top eSports competitors are compensated quite handsomely, there is a sharp drop-off to the next tier of professional players. According to Blume, a typical professional video gamer makes only $40,000 to $60,000 a year, making them highly susceptible to engage in match-fixing for a substantial but not exorbitant payoff. That being said, Blume noted that licensed and regulated sports books rely on match integrity for all of their contests, and have been keeping a watchful eye on the industry. Both Blume and Grove indicate the fragmented industry is starting to consolidate, which allows for better internal controls by the leagues, will likely lead to higher average salaries, and offers Blume and other sports books operators the capability to work in unison with the leagues to sniff out potential match-fixing and hopefully nullify it to the point where itâ&#x20AC;&#x2122;s no longer a major concern.

Upshot ESports are here, and theyâ&#x20AC;&#x2122;re here to stay. The question is whether they will carry on as a stand-alone industry, or will be enveloped by the gaming industry and turned into a ubiquitous product that finally brings millennials into the folds of the brick-and-mortar casino industry. Only time will tell.

Steve Ruddock is a full-time writer covering nearly every angle of the iGaming industry for multiple outlets, including Bluff magazine and Online Poker Report. His primary focus is the developing legal and legislative picture for regulated U.S. online poker and gambling.

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iGAMING NORTH AMERICA

We Are Getting It Wrong Why some of the “solutions” to today’s problems may not work

and-based casinos in the United States have both a millennial problem and an opportunity. The United States has 80 million millennials, that is, Americans aged 20-35. You know them. They are the ones that go to concerts or get together with friends, but never put down their phones. The overwhelming number have active accounts on Facebook or other social networking sites and post countless selfies of their daily lives. Millennials, however, are much less gambling-centric. A large percent of millennials that go to Las Vegas and Atlantic City do not gamble at all. They clearly do not favor slot machines. They do like other things with their recreational dollar. They like dayclubs and nightclubs. They have no apparent problem with expensive bottle service. They present a huge problem (and opportunity) for the domestic gaming industry. But, much of Nevada’s reaction to millennials is an odd one. Some casino companies get it implicitly. In an interview with a local television station, MGM Chairman Jim Murren said about the younger customers, “Many of them have no interest in gambling, and that’s fine with me.” He is exactly right. You conform your business to the customer’s preferences instead of trying to get them to conform to an antiqued business model. While MGM and others are creating new reasons for the younger customers to spend their entertainment dollars in Las Vegas, some other actions are more puzzling. On May 19, 2015, Nevada Governor Brian Sandoval signed Senate Bill 9 into law, which concerns the integration of skill elements into gaming devices. In particular, the bill allows manufacturers to create games that vary payouts based upon a player’s skill—a stark departure from the purely chance-based slot machines in use. The millennials have not shown any propensity toward wanting to play skill-based slot machines. What we are not likely to see is banks of skill games on the casino floor. Internet

Global Gaming Business JANUARY 2016

By Anthony Cabot

skill game websites have had moderate success, because they have the ability to draw interested players from across the world. As of December 2014, there were 3,079,339,857 internet users worldwide. If you can get an audience of one-half of 1 percent, you would have a thriving business. In contrast, if onehalf of 1 percent of every casino customer played your in-house skill games, you would close your casino. Moreover, even with over a decade in use, skillbased video sport games played for money in bars across America do not have banks of devices in each tavern, but rarely have more than one in any given location. It is a good business, but no threat to the $66 billion casino industry (nor its savior).

‘‘

transformational idea in decades. When customers showed a preference for other nascent industries, such as internet gambling, online poker or fantasy sports, the response has been not to embrace change and be thought leaders but to prohibit or gain a monopoly over it. (Although credit has to go out to Caesars Interactive, IGT and MGM for embracing social gaming before the casino industry as a whole could react negatively to it, because social games involve billions of dollars not being spent in the casino.) Nevada and the gaming industry have two futures. It could be like horse racing, whose popularity continues to wane in the United States. Horse racing will never go away, but just 35

The reason these games do not resonate more is simple: Skill games require skill. Most people do not have skill to be successful. The reason these games do not resonate more is simple: Skill games require skill. Most people do not have skill to be successful. Unskilled players, called fish, may play initially. Skilled players, called sharks, will take advantage of the unskilled players. Fish either get eaten—that is, lose consistently until they quit—or become sharks. Without fish, popularity will dip. Big sharks will then eat little sharks, until the environment is left only with enthusiasts—and many of the big sharks will look to different opportunities. To attest to this phenomenon is the plummeting popularity of online poker. Of course, Nevada was right to try this in the casino and it may be a nice addition, but it isn’t going to transform the casino floor. This fascination with trying to maintain an “integrated resort” world driven by casino games is a burden on Nevada. You can try to change customer preferences by reinventing the casino or you can meet new customer preferences by reinventing the integrated resort. The casino industry as a whole has not had a

”

years ago, it was the most popular betting and spectator sport in America. Now, it loses 5 percent of its player base every year because they literally die. Or, our industry could embrace the player preferences, rather than thinking we can change or drive them into extinction (i.e., internet gaming is not going away even if Congress decrees it is illegal, and as a country, we should not divert limited law enforcement capabilities from more important things to dictating that persons can only spend their gambling money in a casino). If the advent of millennials means a part of the casino today will be repurposed for nongaming purposes tomorrow, that should be fine with everybody, as long as they still show up in Vegas with money. Anthony Cabot is one of the premier legal experts in land-based and online gaming, and is a partner in Lewis & Roca in Las Vegas. He is also a partner in the iGaming North America Conference.

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New Jersey Ready to Finalize Some Online Gambling Rules

New York Judge Shuts Down DFS

n a season of difficulty, a New York judge in December dealt the cruelest blow to the daily fantasy sports industry, when he upheld a ruling by New York Attorney General Eric Schneiderman that the activity amounted to illegal sports betting and let the ban stand. New York Attorney While Manhattan state General Eric Supreme Court Justice Schneiderman Manuel Mendez didn’t make a final declaration on that question, he indicated he wanted to let the courts decide the legality of the games before allowing them to resume. “The protection of the general public outweighs any potential loss of business,” wrote the judge in his opinion. DraftKings—which had continued to operate in New York, while its rival, FanDuel, had not—immediately filed an appeal to Mendez’s ruling. David Boies, a lawyer for DraftKings, contends that DFS is legal and that the judge should have maintained the status quo while legal arguments played out. FanDuel affirmed that it was on the same page as DraftKings. “We remain committed to ensuring all fantasy sports are available to New Yorkers, and will work to bring our product back to sports fans around the state through our appeal and working with the legislature to enact sensible regulations for fantasy sports,” New York-based FanDuel said in a statement. “Today’s preliminary decision was wrong, and we expect we will ultimately be successful.” Nonetheless, the chairman of a state legislative committee with authority over gambling said at a legislative hearing that he expects the state will move to legalize and regulate daily fantasy sports, despite the ruling. Assemblyman J. Gary Pretlow, who leads the Committee on Racing and Wagering, did say, however, that lawmakers were waiting for the ruling before proceeding. Now that the judge has ruled, Pretlow said the legislature will move to legalize DFS. “We’re not here to litigate the legality of fantasy sports,” he said. “That is in the courts right now, and regardless as to what the outcome of that case is, what we’re interested in is in regulations, licensure, consumer protection. Those are the issues we’re in-

terested in for the state of New York.” Both FanDuel and DraftKings have argued that most of their tournaments are won by a small group of highly skilled players, proving the games take skill to win. They also argue that players aren’t making a traditional bet, but instead entering a contest and competing for prizes. Officials for the industry said again they are willing to work with states to ensure proper consumer protections are in place.

Pennsylvania iGaming Tied to Budget

he path to legal online gaming in Pennsylvania may have just gotten much shorter. The Pennsylvania House Appropriations Committee voted last month to clear a budget plan for 2016 that includes a provision to legalize online Senate Majority Leader Jake Corman gambling within the state’s borders. The proposed budget plan reportedly includes $120 million as the state’s portion of projected online gaming revenue, with an additional $24 million from related license fees. The House plan is at odds with a separate budget plan in the Senate, which has outlined expenditures but does not break out any potential revenue sources. According to online news site Casino News Daily, state Senate Majority Leader Jake Corman said the Senate is not likely to support iGaming legalization or any of the other gaming expansion measures at this point. Even if iGaming were legalized before the end of the year via the state budget, implementing legislation setting out the rules would still need to be cleared. The most likely rules scenario is included in a bill cleared in November by the House Gaming Oversight Committee that would legalize a complete slate of online poker and casino games. Online gaming licenses would be required to be held by the state’s land-based licensees, for a one-time license fee of $8 million. Online gaming revenues would be taxed at 14 percent, with another 2 percent going to host communities. The full House is expected to vote on that bill soon.

hree online gaming rules in New Jersey have entered the public input phase, one of the last steps to being finalized by the state Division of Gaming Enforcement. The rules—which have been in place for a year—allow casinos to pay celebrities—such as poker professionals—to directly play against customers as a tournament promotion. Companies may choose to pay the celebrities by funding the stars’ accounts and allowing them to retain winnings. The state is also revising a rule that requires casinos’ online servers to be stored within Atlantic City casino-hotels. The new rule allows the servers to be located in another Atlantic City property, provided the property is secure, owned or leased by the casino licensee, inaccessible to the public and specifically designed to house the equipment, the Press reported. The final rule allows costumers of online sites to use their accounts to play free social games, provided the games are clearly marked as not being regulated by the state. The division plans to have the rules finalized and written into the state register after the public-comment period expires February 6.

IGT Licenses Patents to Gamesys

eading slot supplier International Victor Duarte Game Technology Plc. announced that it has reached a licensing agreement with Gamesys, providing the online gaming company with intellectual property usage rights for certain game features offered in IGT’s patent portfolio. IGT holds more than 2,000 game feature patents worldwide. The license agreement provides Gamesys with player-favorite game and bonus features found on IGT slot machines for use in the Gamesys library of slot titles. “We are very pleased to reach an agreement with Gamesys to provide licensing for IGT’s best-in-class game feature patents,” said Victor Duarte, IGT’s global chief product officer for gaming. “Working in partnership with Gamesys to enhance its online games leverages our industry-leading R&D investment to deliver better games to more players.”

JANUARY 2016 www.ggbmagazine.com

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SIGNED, SEALED… AND THEN

Tribes, states pushing IGRA Envelope on Compact Talks

BY DAVE PALERMO

merican Indian law experts and federal officials are expressing concern that local government mitigation agreements and labor provisions in recently negotiated casino regulatory compacts in California encroach on tribal sovereignty and self-governance. Tribal lawyers contend California compacts—and to a lesser extent, those in other states—include revenue sharing and other concessions that violate the intent of the Indian Gaming Regulatory Act (IGRA). The U.S. Interior Department, in November 2 letters to California Governor Jerry Brown and three tribes, questioned whether compact local mitigation provisions adhere to IGRA prohibitions against taxation of tribal gambling revenues. Brown and the tribes—Santa Ynez Band of Chumash Indians, Sycuan Band of the Kumeyaay Nation and United Auburn Indian Community— contend mitigation provisions are permissible under IGRA to reimburse local governments for services impacted by tribal casinos. Interior Assistant Secretary of Indian Affairs Kevin Washburn later “deemed approved” the compacts, a bureaucratic move that stops short of endorsing the agreements but finds them not in conflict with IGRA. Meanwhile, attorneys for 31other California tribes seeking extension of compacts due to expire in 2020 are miffed that Brown and UNITE HERE are demanding amendments to tribal labor relations ordinances (TLROs) to make it easier for the union to organize casino workers. California is the only one of 28 states with Indian casinos that requires TLROs as a condition for tribal-state regulatory agreements mandated by federal law for tribes operating casinos. “California is unique because union organizing was integrated into the tribal-state gaming compacts,” says Richard Guest, an attorney for the Native American Rights Fund. “If you want to have a gaming compact, the state of California is say-

Global Gaming Business JANUARY 2016

ing because of political pressure from organized labor you as a tribe need to have labor provisions which allow for union organizing.” California tribes with Brown compacts are ceding rights under the National Labor Relations Act (NLRA) at the same time tribes in other states are seeking congressional approval of the Tribal Labor Sovereignty Act, which would give tribes parity with state and local governments exempt from union organizing provisions of the NLRA. The sovereignty act has been approved by the House and awaits action in the Senate. President Barack Obama opposes the legislation, which he says does not adequately protect tribal casino workers. TLROs with Chumash and Sycuan call for tribal neutrality and “Consent Election Agreement Procedures” allowing mail-in ballots, which critics contend is tantamount to card checks. “I find it atrocious, these changes,” says a tribal official who requested anonymity. “The very idea that a state can force a tribal government to be quiet in a collective bargaining election is nuts. “The state is mandating that tribes surrender their right to advocate that their employees vote ‘no’ in a union organizing election, or ‘yes,’ for that matter. This goes to a fundamental core issue of tribal self-governance.” Brown spokeswoman Deborah Hoffman says union officials are invited to participate in compact talks only if both parties agree. “Courts have determined that the issue of labor relations is an appropriate and legally permissible topic for compact negotiations,” Hoffman said in an email. “The state seeks to resolve this issue in a manner that is respectful of tribal sovereignty and fair to employees.” A 9th Circuit Court of Appeals ruling in 1999 did uphold TLROs as permissible in tribal-state compacts. But labor is not on IGRA’s list of permissible negotiation topics, and subsequent court rulings, including the U.S. Supreme Court in Michigan v. Bay Mills Indian Community, suggest items not on the list should not be negotiated.

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Tribes have negotiated and renegotiated compacts in California with the last three governors—current leader Jerry Brown, and former governors Arnold Schwarzenegger and Gray Davis (l. to r.)

In addition, an administrative law judge in a November ruling on a labor dispute at the Pauma Band of Luiseño Mission Indians casino says the NLRA supersedes TLROs and tribal-state compacts. “The labor provisions are unnecessary and overreaching,” tribal attorney George Forman says. Interior did not mention TLROs in its letters to Brown and the tribes. But a high-ranking official who requested anonymity says Interior is conflicted on the role of labor in compact negotiations. “It’s a tough issue,” the official says. Leaders of newly compacted tribes herald the agreements. “The new compact represents a respectful, government-to-government negotiation that mutually benefits the state, tribe and local community,” Sycuan Chairman Cody Martinez said in a prepared statement. Chumash Chairman Vincent Armenta, a proponent of organized labor, believes the amended TLRO is a more equitable arrangement for the tribe’s 2,000 casino workers. “Our strategy was to make sure there was a fair opportunity that left the decision up to the employees whether or not they wanted to organize,” Armenta says. “I think the amended TLRO reflected that, very clearly.”

California Focus Of Compact Talks California is by far the nation’s largest Indian gambling market, with 60 tribes generating $7 billion a year, roughly a fourth of the $28.5 billion won annually by Indian casinos in 28 states. Thirty-one California tribes operating state-licensed casinos are seeking to renegotiate, as a group, landmark compacts signed by 58 tribes in connection with passage of Proposition 1A in 2000. Other tribes have since negotiated new or amended compacts with Brown or former Governor Arnold Schwarzenegger. The Lytton Band of Pomo Indians owns a Class II casino near San Francisco not subject to state regulations. It was the intent of IGRA that gambling be used to strengthen tribal governments and build diversified tribal economies. Tribal-state compact negotiations under IGRA are largely restricted to the scope and regulation of gambling with states reimbursed for regulatory costs. But 10 of 28 states with Indian casinos receive some form of revenue sharing, upon which Interior generally frowns. Interior policy does allow for revenue sharing if tribes receive a major benefit, most often statewide or regional casino exclusivity. Critics and Indian law experts contend compact negotiations in California and elsewhere have expanded beyond the intent of IRGA to include jurisdictional issues and matters not related to gambling. “States and tribes are starting to include provisions in the compacts that really don’t have anything to do with Indian gaming,” Michigan attorney Lance Boldrey says. “Interests beyond those associated with gaming are entering into negotiations,” says Joseph Kalt, head of the Harvard Project on American Indian Economic Development. “Tribes are being pressured and, to their own discredit,

succumbing to pressure and effectively surrendering sovereignty in key ways.” “It’s our fault—or, I’ll say me—for not being far-seeing enough when we negotiated IGRA to accept language that (casino) gambling would be illegal unless tribes and states entered into a compact,” says Frank Ducheneaux, former legal counsel for the House Interior Committee credited with drafting IGRA in 1988. “The compact process put all the power in the hands of the state,” says Ducheneaux, particularly after the U.S. Supreme Court in Seminole v. Florida in 1996 upheld states’ 11th Amendment immunity from lawsuits by tribes seeking to force state officials to the negotiating table. States can simply walk away or demand certain things. “I don’t so much mind the revenue sharing,” says Ducheneaux, a Cheyenne River Sioux who has since retired from public service. “What is more important is basic tribal governing powers are being ceded because a state insists on labor unionization, OSHA and those kinds of things.”

Compacting Trends Across The Country Eleven of 28 states with tribal casinos have compacts with no termination dates. Others have automatic extensions. Compact negotiations were recently completed in Florida, and are ongoing in Michigan and Alabama. Other cash-strapped states such as Oklahoma are anxious to get talks going. Revenue sharing is the goal. The Seminole Tribe of Florida completed negotiations with the state for the right to continue offering blackjack and other games at its Hard Rock casinos, extending a compact signed in 2010. But negotiations were complicated by proposed commercial gambling in Miami and elsewhere. In the new deal that starts in 2017, the tribe will contribute more than $3 billion to the state over seven years. “I have executed this compact after months of collaboration, negotiation and discussion,” Florida Governor Rick Scott said. “This compact represents an unprecedented level of cooperation between the state of Florida and the Seminole Tribe of Florida, including the largest revenue share guarantee in history at $3 billion, which is three times the prior compact guarantee of $1 billion.” The deal, which still must be approved by the legislature, also allows for the addition of slot machines at a Palm Beach County dog track and also leaves an opening for another casino in Miami-Dade County, as well as allowing for for existing tracks in that county and Broward County to eventually add blackjack tables as well. In Michigan, negotiations between state officials and six of the state’s 12 casinos tribes whose compacts expired in 2013 will likely remain bogged down for months, if not years. The agreements with Bay Mills, Grand Traverse Band of Ottawa and Chippewa Indians, Hannahville Indian Community, Lac Vieux Band of Lake Superior Chippewa, Saginaw Chippewa Tribe and Sault Ste. Marie Tribe of Chippewa required that they contribute 8 percent of casino net revenues to the state and 2 percent to local governments. JANUARY 2016 www.ggbmagazine.com

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Chumash Chairman Vincent Armenta believes that labor unions should be a part of the California compacting process

But commercial casinos in Detroit, tavern slot machines and expanded tribal gambling all violate promised exclusivity, and negated Michigan’s share of revenue from the tribes’ 13 casinos, money Governor Rick Snyder wants back in the budget. In fact, he is hoping for 12 percent of the state’s Indian casino money. Unfortunately for the governor, compact language allows agreements to remain in effect “until exhaustion of the administrative and judicial remedies set forth in IGRA and/or any other applicable federal law.” Oklahoma Governor Mary Fallin wants an increased share of revenue from the state’s 33 casino tribes to spur an economy suffering from a struggling oil industry. But she doesn’t have much leverage, because the agreements have automatic 15-year renewals when they expire in 2020. Fallin is termed out of office in 2018. The agreements give the state 6 percent of the revenues from 41,000 slot machines and 10 percent of the table game win. Tribes have generated $1 billion for the state since a compact was agreed to in 2004. The state and tribes are sending mixed messages. “I think it would be fair to say we’re ramping up our discussions with the tribes,” says Steve Mullins, Fallin’s chief counsel. “There have been no discussions” with the governor’s office, Comanche Nation Chairman Wallace Coffey says, informal or otherwise. Rather than cede additional revenue sharing to the state, Oklahoma tribes are acquiring more Class II, bingo-style machines not subject to taxes. Class II devices comprise 40 percent of the state machine inventory. Class II gambling has proven profitable for the Poarch Band of Creek Indians of Alabama, who operate three large hotel-casinos without competition from other tribes or commercial casinos. Federal courts in September upheld the tribe’s right to operate Class II gambling, ending attempts by state Attorney General Luther Strange to have the machines declared illegal. Poarch Creek is talking with Governor Robert Bentley about a compact, something the tribe has lacked since opening a bingo parlor in 1985. Alabama officials have rebuffed tribal efforts to get an agreement, but a looming budget deficit has changed the political landscape. Poarch Creek would welcome a compact to ensure casino exclusivity and allow the tribe the opportunity to open a fourth casino upstate. But the tribe is satisfied with the current state of affairs so long as politicians don’t allow slots at dog tracks, which has been discussed. “The tribe really doesn’t need a compact,” says Councilman Robert McGhee. “We do well.” Interior in 2012 rejected a draft Massachusetts tribal-state compact with the Mashpee Wampanoag Tribe that included provisions dealing with hunting and treaty rights on the grounds they were issues not related to gambling. It later approved an agreement eliminating the hunting and fishing provisions but including a revenue share to the state. The federal agency did not act on an agreement by the New York Oneida to share gambling revenues with the state in exchange for tax and land issues, contending the deal did not constitute a compact. 58

Global Gaming Business JANUARY 2016

California Dreamin’ Thirteen California tribes that have negotiated compacts with the Brown administration applaud the process and contend the agreements protect Indian sovereignty. Some tribal lawyers agree, noting the Sycuan agreement specifies disputes be resolved in tribal courts. There is no template for the agreements, which vary among the tribes. “There are a lot of pro-tribal things in these agreements,” Forman says. But Forman and several other lawyers are critical of mitigation and labor provisions. Interior’s Paula Hart, director of the Office of Indian Gaming, asked in the November 2 letter for an explanation why local government mitigation provisions “do not constitute a tax, fee, charge or other assessment prohibited by IGRA.” Brown negotiator Joginder Dhillon and the tribes say revenue sharing is permitted in IGRA to assist local government agencies impacted by tribal casinos. “As such, it is consistent with other revenue sharing provisions that have been determined not to be a tax or otherwise inconsistent with IGRA,” Martinez says in his letter to Interior. Tribal attorneys fear mitigation provisions may be used to allow local government jurisdiction over hotel projects and other development on Indian lands not directly related to casinos. “I can’t address what’s going on in the talks at all,” Forman says of negotiations between his clients and Dhillon. “But there are a lot of things in these compacts that have nothing to do with the regulation of Class III gaming.” General fund payments demanded by former California governor Schwarzenegger in exchange for additional slot machines were deemed an illegal tax by the 9th Circuit Court of Appeals in a landmark 2010 ruling on a lawsuit filed by the Rincon Band of Luiseno Indians, a decision later upheld by the U.S. Supreme Court. In lieu of payments to the state’s general fund in violation of Rincon, Brown is asking that tribes enter into mitigation agreements with counties and municipalities for fire, law enforcement and other services. The payments offset contributions to a grant fund and Revenue Sharing Trust Fund (RSTF) used to reimburse tribes with limited or no gaming. Most tribes voluntarily enter into agreements to reimburse local governments for various services. But some object to mandatory agreements as a violation of sovereignty. “A tax is a tax,” says a tribal attorney who requested anonymity. “It’s quite remarkable that California is demanding tribes make contributions to local governments and the RSTF instead of the general fund. You’re still looking at a 10 percent tax rate.” While remaining mute on the labor issues, Interior’s Washburn, an Obama appointee, has pushed back against what he believes to be unreasonable revenue sharing demands. But he has avoided injecting the agency in tribal-state matters. Washburn declined to be interviewed for this article. “The Department of the Interior is caught in this Catch-22 where it doesn’t want to deprive a tribe of a compact, yet at the same time these compacts being submitted are stepping over the line,” a tribal source says. “Someone should perhaps say, ‘This is a tax in violation of IGRA. We’re not going to approve a tax,’” Ducheneaux says. “But then you get to the point where Washburn has to disapprove a compact. Then what happens? “It’s tough to say to a tribe, ‘We’re not going to let you do this,’ and the tribe loses millions of dollars. That’s tough.”

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EMERGING LEADERS

Poker Passion Rory Shanahan Director of B2B Products & Marketing, Interactive, Scientific Games Corporation

Legal Excitement Sheila Bangalore Assistant General Counsel, Aristocrat Technologies s assistant general counsel of Aristocrat Technologies, Sheila Bangalore has quickly climbed the legal ranks of the gaming industry. Before she transitioned her career into the gaming industry, however, Bangalore had already amassed an impressive array of positions and experience. She held various private practice associate and government clerk positions while in law school at the Washington University School of Law in St. Louis. After graduating with a juris doctor in 2003, Bangalore went on to work as an associate for a premier commercial law firm in Miami before moving to a publicly traded travel company as a consultant attorney. With a distinguished resume under her belt early on in her career, Bangalore undoubtedly had a variety of career paths available to her. Why then, did she choose to pursue a career in gaming? Similar to other emerging leaders in the industry, the fast-paced, evolutionary nature of the gaming industry originally attracted Bangalore. “I was interested in everything that came with the industry,” comments Bangalore. “I was drawn to its tenacity as well as its ability to transform and grow with generations.” Bangalore was fortunate to begin her career in gaming at the epicenter of the domestic industry, Las Vegas. This was another factor that drew her to industry. “Gaming drives the Nevada economy,” Bangalore notes. “Being a part of that in any way, shape or form was really amazing, and what I wanted.” Upon moving to Las Vegas, she began working as assistant general counsel for Bally Technologies. While she had impressive experience outside of the industry, she had minimal experience within gaming. “I was fortunate Bally was willing to bring on a relative newbie,” jokes Bangalore. Bangalore notes that there is a “laundry list” of people that she considers mentors and friends from throughout her gaming career. During her time at Bally, Bangalore feels fortunate to have worked with, and learned from, Mark Lerner, among many others within the legal and compliance departments at Bally. In her current role at Aristocrat, Mark Dunn

Global Gaming Business JANUARY 2016

“Every single day brings new challenges and no day is the same.” and the legal and compliance teams have been outstanding resources, and she says she feels very fortunate to be part of a wonderful group of people. Additionally, Bangalore notes that Tina Kilmer has been a mentor and then some. “Tina has been a wonderful mentor and very good friend,” says Bangalore. “She is always pushing me to be better.” In between her time at Bally and Aristocrat, Bangalore took a hiatus from the gaming industry, working as senior corporate counsel for a successful e-commerce company. However, the expeditious, challenging industry that is gaming kept calling her back. “There are always interesting challenges that come up with my job in the gaming industry,” says Bangalore. “Every single day brings new challenges and no day is the same.” On top of this, it is clear that Bangalore feels at home in the industry and has built a professional “family” within gaming. Bangalore’s advice for young leaders in the industry is to gain as much exposure as possible. “Invite someone to lunch, find mentors, find sponsors,” says Bangalore. “If you genuinely want to learn from someone, it would serve you well to reach out to them.” —Michael Vanaskie, The Innovation Group

hen Rory Shanahan was completing his undergraduate studies in business administration at the University of Miami, he did not have his sights set on a career in gaming. Shanahan, who currently serves as director of B2B products and marketing, interactive at Scientific Games, came into the industry by chance. “While looking for a summer job before my final year at the University of Miami, a family friend who worked with a number of casino operators in the Midwest got my name to the Rio, where I ended up as the sole intern with the 2005 World Series of Poker,” explains Shanahan. With a great introduction into the industry, Shanahan hit the ground running and did not look back. “I was hooked on the industry by the end of my first week at the WSOP,” Shanahan says. Since his internship with the 2005 WSOP, Shanahan has quickly progressed through the product and marketing channels within the industry. His progression did not come without setbacks, however. During the Great Recession, like many other young professionals, Shanahan was laid off as his department at a previous employer was eliminated due to a merger and subsequent restructuring. “The recession wasn’t much of a picnic,” recounts Shanahan. “The recession was hitting

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Vegas full-steam. There was a massive over-supply of casino talent with very few open positions.” Despite the significant challenge, Shanahan was able to lay the foundation for both his professional and personal life during this time period. “It turned out to be a blessing in disguise,” says Shanahan. “The recession drew me to Chicago and to the supply side of the industry, where I’ve seen the bulk of my professional growth and met my lovely wife.” Working at WMS Gaming in Chicago, Shanahan rose quickly through the marketing ranks and helped grow the division that became SG Interactive when WMS was acquired by Scientific Games. When considering his professional and personal mentors within the gaming industry, Shanahan says countless people come to mind—a good problem to have. “I’ve been extremely fortunate the past 10 years to work with many great mentors in this industry,” explains Shanahan. “Too many to mention in any great detail.” From his early career, Shanahan names Nolan Dalla, Gary Thompson, and Dawn Petrick—with whom he worked with at WSOP and Harrah’s Entertainment—as people who helped instill a passion for gaming. In more recent years, Shanahan values the guidance he receives from the leadership team of Scientific Games’ Interactive division—Jordan Levin, Bob Hays and Tom Wood. “Each has a dedication to our teams and the culture we continue to build,” says Shanahan. “I’ve learned a ton in the past three years and continue to learn daily about both business leadership and product strategy from them.” Shanahan believes the quality that has best served him throughout his career in gaming is the fact he is “truly passionate about the industry, its future, and the value we create.” His advice for young leaders in the industry is to, first, determine whether or not you truly are passionate about gaming. “If you’re getting started in the industry and you find it’s something for which you have a passion, then all the cliches apply,” says Shanahan. “Never stop learning, try to understand as many sides of the industry as possible, and do your best to understand player motivations.” Additionally, Shanahan stresses the importance of understanding the player experience—“not just winning or losing—but win or lose, if the experience was entertaining,” explains Shanahan. “That’s what we do, no matter supply, casino or lottery side in this industry—we create entertainment experiences” —Michael Vanaskie, The Innovation Group

All That Jazz Chris Calitri Slots Manager, Fair Grounds Race Course hris Calitri was born and raised in Lexington, Kentucky, and went to school at what he described as the “best private liberal arts college” in the state, Centre College in Danville. While there, Calitri earned a bachelor of arts in computer science and German. Like most kids growing up in Kentucky, Calitri recalls horse racing being an integral part of life from early on. So naturally, fresh out of college, Calitri was wagering that his professional experience and IT skills could land him a job at Churchill Downs, home of the Kentucky Derby. Calitri’s perseverance paid off as he was accepted into the company’s newly created Management Rotation Program. However, there was one catch. This position would place him at one of the nation’s oldest tracks, the Fair Grounds Race Course in New Orleans—not at the beloved Churchill Downs track in Louisville. In a decisive career move, Calitri packed up his belongings and never looked back. Six years later, Calitri credits his success with the company back to his start in the Management Rotation Program. When he arrived at Fair Grounds, he describes himself as a quick learner that was “not afraid to fail.” The program exposed him to a new department at the track every two to three months, where he eventually met his friend and mentor Duncan McConnell, then senior director of slots. Surprisingly, Calitri found his niche in the world of slots, and jumped at the opportunity when a permanent position became available in that department. Calitri is now the slots manager at Fair Grounds, and truly enjoys his work. The position enables him to be present on the slot floor, which allows him to have intimate knowledge of the products he is offering, in addition to engaging with consumers. Even though McConnell is now senior director of slot strategy and performance at Churchill Downs’ corporate office, Calitri is able to work with him on a regular basis and continues to learn about leadership from his example. When looking back on his career, Calitri says he is most thankful for his committed staff, and proud of their everyday accomplish-

ments as a team. These serve as a constant reminder to simply appreciate a job well done, even the seemingly small and mundane tasks. Calitri admits the best part of his job is being at Fair Grounds during one of their many annual events. Thanksgiving marks the official start of the racing season, and the holiday outing has long been a tradition in New Orleans, with approximately 7,000 in attendance and growing. Each spring the Fair Grounds also hosts the city’s 10-day Jazz and Heritage Festival, drawing musical talent from across the nation and food vendors from around the city. A company man, Calitri hopes to stay with Churchill Downs for the remainder of his career. Perhaps it is part nostalgia for the oncedominant American sporting event, but Calitri believes in the culture of this industry and the innovative minds at the helm of his company. Although Calitri cannot divulge too much information, he anticipates the arrival of new technology at the Fair Grounds that will enhance and revive the consumer experience at the races. Calitri is honored to be recognized by his peers as one of GGB’s 40 Under 40 Emerging Leaders. When not enjoying one of the many annual festivals in New Orleans, you will find him devoting his time to coaching girls’ volleyball at the Bayou Sports Club in Mid-City. —Angela Slovachek, The Innovation Group

JANUARY 2016 www.ggbmagazine.com

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STIFF UPPER LIP

A review of U.K. regulatory developments, including the point-of-consumption regulatory regime a year on BY TONY COLES AND ANDREW COTTON

he Gambling (Licensing and Advertising) Act 2014, which amended the Gambling Act 2005 (GA05) came into force November 1, 2014 after a series of delays including an unsuccessful legal challenge by the Gibraltar Betting and Gaming Association (GBGA), on which the High Court handed down an extremely comprehensive judgment, rejecting the claim for judicial review. The GBGA challenged both the new legislation and the Gambling Commission regulatory regime as being a barrier to the free movement of services contrary to Article 56 of the Treaty on the Functioning of the European Union (TFEU). The court, in applying the principles established by the European Court of Justice in other challenges to the legality of licensing regimes, concluded that the U.K. government and the commission were entitled to adopt a precautionary approach in requiring all overseas remote operators to obtain an operating license from the commission if they were to continue to offer their gambling facilities to players based in Great Britain. Prior to the implementation of the new legislation, overseas remote operators licensed in another European Economic Area (EEA) state, Gibraltar or one of the “white list” jurisdictions (in the main Alderney and the Isle of Man) were entitled to rely on that license in providing their services to British customers. Only 15 percent of the remote gambling sector was licensed by the commission prior to 2014.

Implementation of the Act Under the transitional arrangements, those operators already licensed in an EEA or former white list jurisdiction were entitled to apply for “continuation rights,” allowing them to continue to deal with British players pending final 62

Global Gaming Business JANUARY 2016

determination of their applications. The commission launched an online application process in advance of the application window, based on the Multi-Jurisdictional Business Form, devised by IAGR. Over 170 transitional applications for remote operating licenses were submitted to the commission by the required deadline, but it did not complete processing all of the full license applications and accompanying documentation until the spring of 2015.

Personal Management License and Personal Declaration forms Personal Management Licenses (PMLs) are required by those responsible for the following specified management offices: • The person responsible for overall management and direction of the licensee’s business or affairs; • The head of the finance function; • The head of the marketing function; • The person with overall responsibility for gambling-related technology; and, • The person with overall responsibility for regulatory compliance. The person holding this position is not permitted to hold any other management position without specific approval from the commission. Those post holders were required to file applications for PMLs along with the application for continuation rights, and the final operating licenses could not be issued until all PMLs were granted. Where three or fewer persons occupy the specified management offices they are able to submit a Personal Declaration instead. New requirements for those applying for PMLs or Personal Declarations were introduced as part of the new licensing regime:

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License condition 2.2.1 requiring U.K.licensed operators to obtain gambling software only from holders of a Gambling Commission gambling software license came into force on March 31. A software license authorizes the holder to manufacture, supply, install or adapt gambling software. The definition of gambling software and its difference from other forms of software is complex, and will almost certainly be the subject on ongoing debate.

These included new requirements for the handling of customer complaints and disputes so that if, at the conclusion of the initial internal investigation of the complaint, a customer remains dissatisfied, they are entitled to refer any unresolved gambling dispute to an Alternative Dispute Resolution entity (ADR). Operators are required to provide this service free of charge. Remote operators were also required to make arrangements to link all accounts held by a customer to assist with the monitoring of accounts for the identification of problem gambling. New requirements were also introduced requiring operators to hold all customer funds in a separate account from company funds. Operators are required to identify in their terms and conditions the level of protection of customer funds in the event of insolvency, and require the customer to acknowledge the information before being permitted to gamble. Website home pages and every page from which gambling facilities can be accessed are required to state that the operator is licensed and regulated by the commission and to include a link to the license register entry on the commission’s site.

Policy and Procedure Documentation • Key management and/or holders of at least 10 percent equity in an operating license applicant were required to provide a personal credit report produced no more than six months before the date of application. • Holders of at least 10 percent equity in an operating license applicant who would be providing funding from their own personal wealth were required to supply original bank statements for the past three months for the relevant accounts. • Key management were required to provide evidence of competence, for example, by producing CVs. • All applicants were required to sign a consent to enable the commission to obtain any information it requires from third parties, including regulatory bodies in other jurisdictions. • Applicants residing outside the United Kingdom were required to obtain a police report from their local police station, as the commission is only able to undertake checks on U.K. residents (including those who live in the Isle of Man).

License Conditions and Codes of Practice U.K. Operating Licenses are issued subject to a suite of License Conditions and Codes of Practice (LCCP). License conditions are mandatory requirements, and the breach of any license condition is a criminal offence. GA05 provides for the imposition of two types of code of practice—social responsibility provisions, which have the force of license conditions; and ordinary code provisions, which set good practice which the commission expects operators to follow. Licensees are only able to adopt alternative approaches where they can demonstrate that to do so would be equally effective in achieving the objective in the code. LCCP is based on the principle that licensees are responsible for delivering the three statutory licensing objectives under GA05. These are: • keeping gambling free from crime and from being associated with crime; • ensuring gambling is fair and open; and, • protecting children and vulnerable people from being harmed or exploited by gambling. The commission periodically reviews LCCP, and a major review was undertaken in the spring of 2014. As a result, side by side with the new regulatory regime, changes were introduced and implemented in August 2014.

As part of an application for an operating license, applicants are required to produce detailed policy documentation, which demonstrates how they will ensure that they operate in a manner consistent with the licensing objectives. LCCP requires licensees to put in place effective policies and procedures for managing risks to the licensing objectives, and they must keep their policies reviewed to ensure they are applying the requirements in LCCP. They must also ensure that their policies are reviewed and redrafted, as required, each time the commission implements changes to LCCP. Following the implementation of the 2014 Act, the commission consulted on significant changes to the social responsibility provisions to LCCP, which were implemented in May and October 2015. The most important changes for the remote sector were: • Imposing a mandatory requirement to contribute to organizations which undertake research into the prevention and treatment of gambling-related harm; • Enhanced requirements for staff to be trained on preventing underage gambling, customer interaction and self-exclusion; • Enhanced requirements for the identification of at-risk customers and interaction with such customers; • A new provision requiring operators to share experience and best practice on customer interaction; • Changes to the minimum self-exclusion period, which initially must be no less than six months and no more than 12 months, with the ability for the customer to extend this by one or more six-month periods; • An additional requirement to signpost customers to counseling and support services; • A revised requirement that licensees must have regard to the U.K. advertising regulator’s guidance on the rules for gambling advertisements in addition to complying with the regulator’s advertising codes of practice and with the U.K. Industry Code of Practice for Socially Responsible Advertising; and, • The provision of time-outs for customers who wish to take a break from gambling but not self-exclude.

Business Plan, Conduct in Other Markets and Information Requirements Under the 2014 changes, all remote license applicants were required to file a comprehensive business plan including details of all jurisdictions from which the license applicant derived 3 percent or more of total revenues. For those JANUARY 2016 www.ggbmagazine.com

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The largest 75 gambling operators will be required to file an annual assurance statement with the commission commencing in April 2016. These will involve a detailed regulatory compliance assessment and action plan to mitigate any shortcomings identified. with revenues of less than £5 million, the commission requires details of the markets from which they derive more than 10 percent of total revenues. Where an applicant held no license in such jurisdictions, it was necessary to provide the legal rationale for transacting with end users. Where legal advice has been taken it was necessary to confirm who has provided the advice, although it is not necessary to provide the actual legal opinion. The obligation for licensees to report details of new jurisdictions which exceed the 3 percent and 10 percent thresholds is an ongoing one. Under ordinary code provision 8.1, licensees are required to work with the commission in an open and cooperative way and inform it of any matters of which the commission would reasonably need to be aware in exercising its regulatory functions. Licensees are also required to notify the commission of a wide range of specific “Key Events” listed in LCCP within five working days. Licensed operators are also required to submit regulatory returns on a quarterly basis.

Requirement for Software Suppliers to be Licensed License condition 2.2.1 requiring U.K.-licensed operators to obtain gambling software only from holders of a Gambling Commission gambling software license came into force on March 31. A software license authorizes the holder to manufacture, supply, install or adapt gambling software. The definition of gambling software and its difference from other forms of software is complex, and will almost certainly be the subject on ongoing debate. Remote operators have been prevented from using any new software from an unlicensed software provider since March, and this includes the adaption of software supplied prior to that date. It is an offense not to comply with the condition.

Remote Technical Standards and Testing Requirements License condition 2.3 requires licensees to comply with the commission’s Remote Gambling and Software Standards (RTS). The commission is to launch a consultation on revisions to the RTS in early 2016. Every licensee’s policy documentation must demonstrate its compliance with RTS, and again, must be reviewed and updated to reflect changes that are implemented. There must also be compliance with the commission’s Remote Testing Strategy. Those who secured continuation rights were allowed a period of 12 months (October 31) to test to the commission’s full requirements. The commission has recently joined with the Alderney Gambling Control Commission, the Isle of Man Gambling Supervision Commission and the Danish Gambling Authority to develop a standard testing framework. The commission launched a consultation on a review of its testing strategy on December 3. Licensees were also required to file an annual security audit with the commission by April 30, and annually thereafter.

Other Pending Changes The commission is currently consulting on proposed changes to the crime-related provisions of LCCP, which are being reviewed for the first time since the GA05 was implemented. The commission’s enforcement and compliance casework has identified significant failings, particularly in relation to anti-money laundering controls, among several leading U.K.-based operators. The voluntary settlements in the two most recent investigations into short64

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comings at two major operators have been publicized by the commission, and it has been made clear that the industry is expected to learn from the mistakes of these operators, which have also been required by their voluntary settlements to surrender significant profits to agreed charitable causes. Changes to the system of customer funds reporting are being introduced in February 2016. The largest 75 gambling operators will be required to file an annual assurance statement with the commission commencing in April 2016. These will involve a detailed regulatory compliance assessment and action plan to mitigate any shortcomings identified. As part of the review of the social responsibility enhancements to LCCP, in 2015 the commission confirmed that it will introduce a mandatory remote self-exclusion scheme, which will require all remote operators to file details of all customers who self-exclude with the commission. All U.K. licensed remote operators will be required to check the database maintained by the commission before signing up a new customer. The commission will be consulting on the detail of the scheme in the first part of 2016.

Conclusion The sweeping changes introduced in 2014 and 2015, which included not only the new regulatory and compliance regime outlined above but also the 15 percent gross profits tax (currently subject to challenge by the GBGA and which has been referred to the European Court of Justice for a preliminary ruling) have meant that very many operators serving the U.K. market have been required to implement many expensive and extensive changes to their operating systems. The changes have hit profits, and so with ongoing challenges and inevitable consolidation, it will be some time before the full effects of the implementation of the new U.K. regime can be fully assessed.

Tony Coles is a consultant with Gordon Dadds LLP in London. Coles is renowned in the leisure industry for his knowledge of gaming and betting law, having led the betting and gaming team at Jeffrey Green Russell for very many years before its recent merger with Gordon Dadds. He regularly lectures to an international audience on gaming issues and is a frequent contributor to gaming law periodicals and journals. In addition to being a past president of International Masters of Gaming Law, Coles is a member of the editorial board of Gaming Law Review and Economics.

Andrew Cotton is director of betting and gaming for Gordon Dadds LLP. Cotton started his licensing career as a legal adviser to the Liquor Licensing and betting and gaming justices in Nottingham over 30 years ago. Prior to joining Jeffrey Green Russell in June 2013, Cotton was in-house compliance legal counsel at the Rank group Plc., one of the U.K.’s largest gambling operators, for over 15 years. He is a member of the International Masters of Gaming Law.

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FRANKLY SPEAKING by Frank Legato

Crime and Horseshoes

Global Gaming Business JANUARY 2016

VICT OR R INALD O

t’s the new year, so I guess this is where we talk about our New Year’s resolutions. My first resolution is to give up watching the news. I think I’ll be happier off the news grid. Unless, of course, it’s news about amusing buffoonery in the casino industry. Like sword robberies, lawsuits and Meyer Lansky. My other resolution is to improve the segues in my columns. Anyway, casinos have had their share of robberies over the past decade. A lot of casino robbers use a gun and a ski mask, although some have been known to sport motorcycle helmets and ninja outfits. (My favorite story is the inside job where employees put on masks to rob their own casino cage but forgot to take off their uniforms and name tags.) Well, it appears things are getting a little more theatrical in the casino robbery business. At press time, police in Rapid City, South Dakota were searching for two men accused of robbing a casino with a sword. Police say the men walked into the East St. Pat Casino one night, displayed the sword and took money from a clerk. Police officers have found the sword, but not the robbers. That’s all the information out there on this story. I don’t know about you, but I need more. Were they dressed like pirates? Hey, if you’re going to use a sword, you may as well give it some flair. “Hand over the doubloons before I skewer ye, matey… Arrrr!” Or maybe they dressed like samurai warriors? That would have been cool too. And if they had a big, cool sword, why did they end up throwing it away? They could use it again to entertain casino patrons elsewhere. One Adam 12… Swashbuckling Errol Flynn lookalike robbing casino cages at swordpoint… Be on the lookout for men in tights… Incidentally, if you understand the opening of the bit in italics above, congratulations. You are old like me. Look, this is the casino industry. If you’re going to do something like this, at least throw some entertainment into the effort. Otherwise, you’re just a desperate nutball in a winter coat and fuzzy hat carrying a big sword. And by the way, any word on why security didn’t notice a couple of guys wandering around with a machete, a cutlass or whatever the heck it was? Maybe everybody in South Dakota carries swords around. Next up, you may recall that way back in March, I made fun of the fact that Horseshoe Cincinnati had given itself the nickname “The Shoe.” It appears that Ohio State University doesn’t think it’s so funny. The university’s Ohio Stadium, built in 1922 and the home of the Ohio State Buckeyes football team, was nicknamed “The Horseshoe” and “The Shoe” long before it was decided Ohio would be a boffo place for casinos. Because, you know, it’s shaped like a horseshoe. The university was OK with Benny Binion calling his joint the Horseshoe, and with other casinos dubbed Horseshoe by the former Harrah’s Entertainment. But evidently, a line was

crossed when the Cincinnati casino folks started referring to their building as “The Shoe,” and attempted to trademark the nickname in 2013. Ohio State, it turns out, had registered “The Shoe” as a trademark seven years earlier, and uses it on a variety of merchandise depicting the stadium. The school is suing the casino for trademark infringement. They could change the name of the casino anyway. It’s being sold to Rock Gaming, so Caesars’ Horseshoe moniker doesn’t apply anymore. And besides, Horseshoe Cincinnati isn’t shaped like either a shoe or a horseshoe. It looks a little like a mall, if you ask me. Fair Oaks Mall, Casino, Hotel & Spa? They could add a Sears and a Macy’s. Just call it Buckeye Casino. No one’s using that name, right? Finally, the family of the late gangster Meyer Lansky is asking the government of Cuba, newly normalized pals of the U.S., if they can be compensated for a Havana casino hotel seized after Cuba’s 1959 revolution. Lansky owned the Habana Riviera, opened only two years before the revolution. Yes, that’s right. He was Hyman Roth in Godfather II. Well, Gary Rappaport of Tampa, Lansky’s grandson, says compensation is in order because the still-new hotel was smashed by rebels and siezed by the Communists, right after Michael Corleone figured out Fredo had sold him out to Johnny Ola. Next, the U.S. government will compensate the descendants of Tony the Ant Spilotro for the money lost when they shut down the Stardust skimming operation. (Yes. Nicky Santoro in Casino.) Hey, maybe the South Dakota robbers can get their sword back.

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CUTTING EDGE by Frank Legato

Betting Solution Product: Web and Mobile Solutions Manufacturer: Best Gaming Technology

GT’s web-based and mobile solutions allow customers to bet where and when they want, 24 hours a day and 365 days a year. All of the BGT solutions are built off the same platform regardless of whether it is terminal, till, web or mobile meaning. The design of the mobile and web solutions implements the latest in responsive and intuitive methods as standard. The function of being forever connected allows a bettor to be at a live event and react to the proceedings immediately, cashing out early, allowing easy actions such as increasing the bet, adding another game, etc. The mobile platform enables the betting world to interact with a different clientele, the more casual bettor. The user interface is similar to that of the terminal and tablet solution, with a goal to get a user to be able to place and track a bet quickly, trigger an early cash-out or watch the match flow of the game. The web platform offers the punter the option to create his own betting cockpit (see wettpunkt.eu to have a look yourself), use a widget to follow several games at the same time or create and save customized coupons (widgets). It offers the chance for the punter to dig a little deeper, and to take a more research-focused approach to the bets they place.

In both platforms, operators have the ability to quickly and easily interact with their users through promotions, coupons, bonuses, etc. This is part of a multi-channel approach to over 170,000 markets per week across 30 sports, which is proving to increase customer retention, as well as reach out to customers with a higher ARPU as opposed to a pure digital or retail customer. With all major feed suppliers providing the most comprehensive sports betting statistics, both solutions give a user all the information from headto-heads, goal scorers and possessions stats, among many other details. Bettors can analyze past results to make a decision on how teams and players generally perform against certain opponents, with features including live scoreboards and in-play match visualizations for a range of sports. For more information, visit best-gaming.com.

Compliance Made Easy Product: Verify+ by Kobetron Manufacturer: Gaming Laboratories International

n jurisdictions worldwide, regulators, suppliers and operators need to focus on compliance issues without the added hassle of tracking multiple signature-generators and readers to validate certified software. They also want to maximize compliance efficiencies with one simple solution. The answer to this problem is the new Verify+ by Kobetron, a leading-edge product developed from the strategic relationship between Kobetron and GLI. Verify+ by Kobetron is a next-generation verification tool that replaces GLI Verify, and puts virtually every new signature method and feature at the user’s fingertips, in one convenient place, empowering users to maximize their compliance and efficiencies with one solution.

Verify+ contains all of the functionality of GLI Verify, with several essential new features including: • The newest signature methods available • Database tables, columns and rows • Full GAT protocol support • Support for all Kobetron and GLI signatures • Support for all verification from other test labs, independent and government Verify+ gives users a wealth of benefits. First, it puts one solution at the user’s fingertips. It also makes data easily searchable and configurable. Because it simplifies the verification process, it helps to ensure compliance and empowers quick and easy verification across the entire floor, finally providing a third-party tool with the consistency regulators need. Verify+ by Kobetron is available now through GLI’s development offices. For more information, visit gaminglabs.com.

JANUARY 2016 www.ggbmagazine.com

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Remote Access Want service while you’re in your room? Today’s hotel room is not your grandfather’s hotel room. By Dave Bontempo

it that remote. Place a drink order, finalize dinner plans, request some towels or enter an on-site tournament, right from the comfort of a hotel room. A vital new gaming role for television has come. Interactive television (ITV) gains an increasingly pivotal role in customer convenience and spending. While most recent gaming innovations surround what’s on the floor—from e-gaming and signage to funds access and mobile apps—the “boob tube” has turned the hotel room itself into a source of revenue. Television no longer has to simply entertain patrons between gambling stints. It has become the vehicle through which to drive innovative software, and, ultimately, customer spending. Some of the function is cutting-edge. Station Casinos will likely deliver UFC pay-per-view events through its guest-room televisions in 2016. It will represent exclusivity, as Station Casinos and the UFC share the same owner, the Fertitta family. How big is interactive television to places like Red Rock and Green Valley Ranch in Las Vegas? Call it Station Identification.

Gaming Goes Allin A major beneficiary of this evolution is Allin Interactive, a luxury cruise-line heavyweight which expanded its base and completed a five-year gaming-world run last month. From debuting at Atlantic City’s Borgata in 2011, enhancing the Red Rock and Green Valley Ranch properties in Las Vegas last year and outfitting the spanking new Scarlet Pearl in Mississippi last month, this 20year-old company owns a lucrative gaming niche. It has parlayed a presence in over 110,000 cruise ship cabins, and on leading brands such as Royal Caribbean Cruise Line, Norwegian Cruise Line, and Carnival Cruise Line, 68

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into the casino world. Its DigiHD ITV solution propels gaming interests, according to John Troutwine, senior vice president of business development for Allin. Casinos invest in the television, Allin provides the software. “The challenge has been to create a return on the ITV system investment for the casino resort operator in an environment where pay-per-view movies are no longer the revenue engine they once were,” Troutwine says. “Much of our time is spent educating casino resorts on the in-room interactive technology ideas that the cruise industry has developed and evolved over the last few years—that is, using the in-room screen to deliver on-demand, real-time information and bookings, drive yields via targeted marketing, and collect instant, actionable feedback from guests while they are still on site.” Allin is a leading provider of interactive application development, technology consulting and platform integration services. The Ft. Lauderdale, Floridabased company deploys turn-key integrated interactive television and interactive mobile applications to the hospitality marketplace with its browserbased DigiManager content management solution. And for the last five years, it has thrived on land. “The cruise industry leaders, in general, are experts at using interactive technology to maximize the guest experience, and therefore guest yields, by exposing guests to on-site amenities, services, and attractions via the in-room television platform,” Troutwine asserts. “They show the guest, via a 30-second ITV video, the ‘Hot Stone Massage’ spa offering, or the ‘St. Thomas Snorkeling Adventure,’ or the ‘Premium Steakhouse’ dining experience.” Gaming can annex the cruise-ship model. Hotel guests observe restaurant reservations, promo offers, spa information, special events, ticketing, room service and points on a beautiful, sophisticated 60-inch screen. Troutwine says Borgata also built an abstraction layer of technology on top of its Bally system, enabling the operator to speak directly to customers. This allows instant lineup changes to be transmitted to guests in their rooms. “The key is that the operators have 100 percent control of the content at all times,” Troutwine says. “They can move quickly enough to react to a situation. Let’s say a spa manager realizes he is slow today from 2 p.m. until 7 p.m. That person has numbers to hit, and the manager may feel the numbers are 50 percent below what is targeted, so now he or she can selectively send out a spe-

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“Because of all the new features always being added, we can always go one step further.” —Aiden Kemp, director of engineering, Fertitta Entertainment

cial, allowing a discount for the next few hours. But it can’t go to everybody, and it can only be for a specific time period. This provides that capability.” Troutwine says operators can obtain the latest functionality at no additional cost with his company’s continually updated support system. Soon to be deployed is a mobile DigiMobile aimed at smartphones and tablets.

Launch Point Allin’s land journey began in Atlantic City in 2011. Borgata, the resort’s most profitable casino, was in the midst of a $50 million project and sought an amenity to fit its identity. The sophisticated revenue triggers that unfolded in subsequent years were not part of this original plan. For Borgata, ITV meant meeting lofty consumer expectations. Period. This is a hotel with two spas, five indoor/outdoor pools, two fitness centers and five boutique shopping experiences. It displays signature restaurants linked with world-class chefs Bobby Flay, Wolfgang Puck, Stephen Kalt and Michael Schulson. Positioned away from downtown, there are no concerns of customers walking somewhere else, but no foot traffic either. For this property, which dwarfs its Atlantic City competitors, image is critical. “In our case, it has been more about customer amenities, and all of our expectations have been realized,” says John Forelli, vice president of information technology for Borgata and the executive who awarded Allin its first gaming credential. “The values we have with the access to MyBorgata Rewards, custom messaging and in-room dining options is tightly coupled with the room rate a customer is paying. The all-in experience is woven into the pillows, the decor, the cleanliness of the room, the size of the TV and the excellent highdef channel quality. We feel this is a convenience they should have at our property.” Forelli considers Allin one of his favorite vendor stories. It was a flip of the usual sales-and-operator give-and-take process, he says. Rather than peruse a proposal, Forelli contacted engineers at Enseo, the company which made the televisions used on his property. “They take pride in what they make, and they are not the sales people, so they are going to tell you the truth,” he laughs. “I asked them out of all the vendors who use their product, which one maximized the capability of it best. They gave me two names; one was Allin. So I reached out to them and said we were interested and asked if they would they give us a demonstration. Within 48 hours, they were here, showing us how well this could work.” Because it remains on Allin’s support program, Borgata has the flexibility to utilize more of the system’s marketing functions in the future if it so chooses. 70

Global Gaming Business JANUARY 2016

Hi-Tech Partnership Fast-forward three years into a different dynamic. Allin’s software was placed inside Red Rock and Green Valley Ranch in conjunction with Cox Business/Hospitality Network last year. Interactive television exceeds the job of image maintenance here. It has been called upon to drive revenue on several levels. The next step will occur via mixed martial arts, a unique dynamic for this property. Wine and cheese? Meet Ground and Pound, all from the comfort of your hotel room. Lorenzo Fertitta owns the UFC and is listed as the co-owner of Station Casinos along with Frank Fertitta III. This inspires a logical hookup. UFC payper-view events will likely be available to Station customers in a few months. Operators normally don’t want customers distracted by an event that usually costs less than $100 and runs three to four hours. But the UFC-Station partnership could produce new revenue streams. Customers who double as mixed martial arts fans can be lured back to many Station properties for other gaming trips. “The UFC business model is perfect for this idea,” says Aiden Kemp, director of engineering for Fertitta Entertainment and a major player in the deal that brought Allin Interactive to the Station properties. “Eighty percent of payper-view buys are made in the 24 hours prior to the event, which lends itself incredibly well to the hotel market. If you are a guest, you don’t have to order the UFC event weeks in advance; we can literally offer it on the day of the show. Offering pay-per-view attractions through a resort is not widely done, but this makes sense in light of the speed and the growth of the UFC.” Pay-per view will become the latest utilization of integrated television, Kemp indicates. It has climbed several rungs of the service ladder, a “zero to hero” approach which included first obtaining high definition, then getting information to guests. The process will ultimately include contacting them directly on-screen and having direct integration for in-room dining and requests for items like towels, along with special events. “Because of all the new features always being added, we can always go one step further,” Kemp says. Station’s relationship with Cox Business/Hospitality brought a unique element into play. The DigiHD ITV solution provides a branded high-definition interactive interface that optimizes the real estate of high-resolution screens. Interactive content is managed on-site via the Allin DigiManager content management portal. Guests can access on-demand content provided by Cox Business/Hospitality Network as well as real-time resort information provided by Station Casinos. In the end, the in-room TV is no longer a distraction the hotel-casino hopes you ignore. It’s now a moneymaker.

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