Casinos try again with ‘coinless’ slots

David Strow

Friday, March 10, 2000 | 11:04 a.m.

After a lot of talk, the gaming industry is finally about to find out whether casino customers are really ready for coinless slot machines.

On Tuesday, the Fiesta hotel-casino switched 50 video poker machines to entirely coinless format. If successful, the Fiesta could convert as many as 300 of its 2,000 machines to coinless in a short period of time.

Market observers say it could be a market development as significant as the introduction of the bill validator, now ubiquitous on slot floors.

"If it works, then you're within 45 days of people accepting them (across Las Vegas)," said George Maloof, president of the North Las Vegas casino. "This is one of the most competitive markets in the world, and you never want to be last."

Maloof today said gamblers like the new machines and are getting used to the ease of play they offer.

"So far, so good. We've had a good response."

Coinless has been widely discussed in Las Vegas, and made its first appearance more than five years ago at the MGM Grand hotel-casino.

But the problem now is the same as it was at the MGM Grand then -- customers may like the experience of coin play too much to go to a coinless system. The machines were quickly pulled from the MGM Grand's slot floor because of low customer acceptance.

Maloof believes some portion of the market may now be ready.

"For someone to make a whole floor coinless, the market's not ready," Maloof said. "But there's a certain person that doesn't want to mess with coins any more. That's perfect for them."

Casinos remain keenly interested in the machines because of the incredible savings they represent.

Las Vegas Investment Advisors estimates that a typical slot machine runs up costs of $250 to $500 per month in operating costs associated with coins, such as wrapping coins or filling hoppers.

Even assuming the lowest cost estimate means the 134,000 slots in Clark County casinos rack up more than $400 million in coin costs each year.

Andrew Hatherly, analyst with Las Vegas Investment Advisors, notes that these costs are accelerating because of the explosion of the nickel slot machine. These machines, which usually come in a "multi-line, multi-coin" video format, allow customers to wager the same amounts of cash as a quarter or dollar player on each spin.

These slot machines now represent 28 percent of Nevada's total slot inventory, up from 25 percent. While total slots grew by 4 percent, nickel slots grew 18 percent.

And that's creating problems for casinos, since relatively paltry payoffs, such as $20 or $40, can easily empty a machine hopper.

"It's driving the slot attendants crazy because they're running around the floor like chickens with their heads cut off, filling hoppers," Hatherly said. "There's certainly a big push for coinless now. Casinos have a tremendous stake in getting rid of metal currency on the floor. It would be an immense cost saving for them."

Marcus Prater, director of marketing at Alliance Gaming Corp. -- the parent company of slot route operator United Coin -- said coinless also results in huge benefits for players as well. When a player wins a big jackpot at a convenience store slot, for example, the player must often wait more than an hour for a service person to show up to pay the player, Prater said.

"All that's eliminated with the ticket system," Prater said. "When we put the ticket system in, players don't just embrace it, they stampede toward it."

Prater acknowledged that several informal surveys conducted by slot-oriented magazines indicate a vast majority of players don't want to see coins removed from slots.

"There's going to be some resistance, certainly," Prater said. "But the convenience factor for the player is dramatic."

The Fiesta machines will use International Game Technology's "EZ Play" coinless system. Anchor Gaming, a partner company of IGT, is also expected to launch its own version of coinless gaming soon, and Alliance is working on its own system as well.

Like similar systems in the past, customers receive payment through a printed ticket, which can be redeemed at the cashier's cage. These systems have been used with success in slots at bars and convenience stores, and at some local casinos, including Arizona Charlie's.

Unlike past systems, however, the ticket works just like cash at another coinless machine -- insert the ticket into the bill validator, and the machine rings up credits. The machine can also be adjusted to pay off small wins, such as 10 coins, in coin, while larger payouts are paid with tickets.

The Fiesta will be the first casino to give this technology a field test.

"Once you get it into an application, that's the real acid test of the system," said Ed Rogich, IGT's vice president of marketing. "I'm sure (customers) will want to get their hands on it. They've all indicated they want similar tests themselves."

The technology for such systems has existed for some time. Bill validators made by JCM America Inc. -- which makes the vast majority of bill validators now used on slot machines -- have been technically capable of reading printed tickets for several years.

The real issue is a matter of software, not hardware. When a validator accepts a coupon, it must not only be capable of reading the barcode, but also must determine whether the ticket is authentic. It also must make sure a ticket can't be used more than once.

To accomplish those tasks, the machine must contact the casino's slot accounting software system, ensure the ticket's validity, then send the appropriate number of credits to the machine. The trick lies in getting the slot machine to communicate with that software system.

Part of that process includes bringing together various patented technologies. There are at least three different patents associated with coinless technology, Rogich said. All cover different elements of a coinless system, and all are held by separate companies.

"There's an effort to figure out how to get these groups together and bundle these," Rogich said. "It's still being defined."

This fight has been taken to court several times already. Last September, IGT and Alliance Gaming settled patent claims against one another over their separate cashless gaming patents, and agreed to license the technologies to one another in a cooperative effort to bring coinless gaming to the market.

A second case, brought before a federal court just weeks ago by IGT rival WMS Gaming Inc., accuses IGT of blocking WMS' efforts to license the coinless technology from IGT joint venture partner Anchor Gaming.

In its lawsuit, WMS accused IGT of blocking its efforts to license cashless gaming software from Anchor Gaming by leveraging its joint partnership with Anchor. WMS also claims IGT demanding a fee of $1,200 per machine for access to IGT's latest slot accounting software, which is used by most casinos throughout Nevada. Without access to this software, WMS wouldn't be able to produce a coinless system that would work at most casinos.

WMS branded this effort "nothing less than a naked attempt to monopolize cashless gaming and to secure IGT's existing monopoly in the market for casino gaming machines."

IGT has called WMS' charges groundless, and is pursuing its own claim against WMS for infringement of a patent IGT says covers all use of touch-screen technology in slot machines. The lawsuits are still pending.

The fight is particularly bitter because slot manufacturers believe the technology represents the future of the slot machine industry. Hatherly agrees, though that future may still be some time away.

"The local slot player tends to be ... a good deal more sophisticated in terms of knowing the slot world," Hatherly said. "That sophistication carries over to their acceptance of coinless.

"The locals will be the first to adopt this technology. The visitors will have a longer learning curve."