Flat casino growth behind slot debate

Flat growth in the number of casino gamblers is behind the move in the Legislature to outlaw slot participation games, says an expert at Anchor Gaming.

"Unfortunately, in our industry, we've designed a little too much of a good thing," said Randy Adams, sales and marketing director at Las Vegas-based Anchor. "We've got too many casinos, too many slot machines, for too few people."

The new machines, while attracting some new players, will alone not grow the market, said Adams.

"We have done nothing in our industry for many years to build that customer base," said Adams.

Adams went on to accuse both sides in the dispute of failing to listen to the other side's concerns.

"Basically, in a nutshell, we filed for divorce without any marriage counseling," said

He and Ron Rivera, vice president of U.S. sales at International Game Technology, discussed the issue at a recent Casino Management Association seminar in Las Vegas.

Several major casino operators like Circus Circus Enterprises are asking the Legislature to require that slots be sold rather than leased, claiming they are losing too much revenue to the slot makers and that the slot makers are too powerful.

Rivera argued that participation games give manufacturers a steady stream of revenues they can pump into research and development of new games.

"It's allowed the manufacturer to do a lot of things," said Rivera.

Those games, properly placed by casino operators, can attract new customers, he said.

But Rivera urged casino executives to understand that 85 percent of the new games fail, and that it costs $2 million to $3 million and five months of development time to create a single new game.

"You may invest $2 million to $3 million on a project and you don't even know if it works," said Rivera.

"Guys, it's expensive to make these machines," said Adams.

An overlooked component of research and development is the cost of labor and the difficulty gambling machine makers have recruiting engineers, said Rivera.

"Manufacturers are competing with Silicon Valley and Bill Gates for engineers," said Rivera.

And many engineers feel they've failed in their careers if they end up working in the gambling industry instead of Silicon Valley, said Adams. Gambling machine makers have to pay more for these engineers, increasing their costs.

Manufacturers need casinos to share in the costs of making new machines, Adams said. If gaming companies choose instead to dump participation games, they'll not only hurt manufacturers' ability to make new games, but they'll deprive players of the games they like.

"You're depriving that player, and that's who's paying these bills," said Adams. "We're at a real crossroads right now."

It's important for casino operators to realize that the more new machines they offer, the greater the public's appetite will be for even newer machines, said Adams.

"They'll always want more," said Adams.

Such demands have created faster replacement cycles, he said. And casinos that don't keep up with replacement demand will suffer, said Adams.

"You had better look at re-doing the bottom 25 percent of your floor each year," said Adams.

Regardless of what happens on the participation game front, market pressures will force "lots" of machine makers out of business in the next 18 months, said Adams.

The executives did not spend the entire CMA seminar arguing the merits of participation games. They also reviewed the technologies that are changing the gaming floor, and made some predictions for the future.

According to Rivera, one of the most important technological improvements to slot machines were expanded reel strips. Introduced in the early 1980s, this "stepper slot technology" allowed the machine to see each reel stop as three different symbols. This in turn lets a machine award a wider variety of jackpots.

For instance, if a single bar, double bar and triple bar all line up on the pay line, a machine with stepper slot technology can be programmed to award a jackpot. Without stepper slot technology, jackpots were generally only programmed to hit when the exact same three symbols lined up.

Another important technological advancement was the introduction of video-based reels in the 1980s. Though video reels "failed miserably" when first introduced, they eventually caught on and now, "In just about every jurisdiction in the U.S., you have video," said Rivera.

Integrated bill acceptors were another technology that was not accepted at first but is now an essential component of a slot machine, said Rivera.

Going forward, the most important trends will be cashless slot machines and standardized platforms that allow games to be added or deleted with the click of a computer mouse, said Rivera and Adams.

"One of the biggest problems in the industry today is handling these coins," said Adams.

Coins add all kinds of costs to slot machine operation, said Adams, mostly in the form of the labor needed to fill and refill machine hoppers, and to man change booths. Adams called it "ludicrous" to argue that players would not gamble on machines that don't pay out in coins, noting the success so far of Video Lottery Consultants Inc.'s multi-denominational cashless slot machines.

"That is a huge, huge thing that you're going to see in the next few years," said Adams.

He also said the industry will move more toward a system where each machine "box" is interchangeable with other boxes, and can run software for whatever game an operator wants to offer.

"You're not locked into the hardware," said Adams.

Games of skill like video poker will also play a greater role in the gaming machines of the future, said Adams. He noted that some jurisdictions allow only games of skill, not games of chance like slot machines.

Second-jackpot games that allow slot players who get a certain symbol on the pay-line to play a side game for a bonus will also continue to gain market share, said Adams. Anchor is building two new second-jackpot games, including one that will have a built-in bowling game, and one with built-in basketballs and hoops, like a Pop-a-Shot game connected to a slot machine.

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