Harrah’s making some slots disappear

A rift may be growing between two gaming industry giants.

Some observers, however, downplayed any conflict involving casino operator Harrah’s Entertainment and slot machine maker International Game Technology.

"It’s more about money than anything," one analyst said.

The issue is over participation slot machines, games in which the casino operator shares the winnings with the manufacturer, sometimes up to 20 percent of the revenues. Sources said Harrah’s, which reported a net loss of $97.6 million in the second quarter, wanted to reduce the gaming revenues flowing out of its casinos and into the hands of slot makers.

Dozens of participation slot machines have disappeared in past weeks from Harrah’s-controlled casino floors, most notably at Bally’s. The games are all IGT-owned devices and some of the company’s more popular titles, including Wheel of Fortune. Harrah’s filled the empty spaces with nonparticipation slot machines, allowing the casino operator to keep all of the revenues.

Harrah’s spokesman Gary Thompson confirmed the participation games had disappeared. Part of the reason was to reduce expenses. He didn’t say how many slots had been switched.

"We try to offer our customers the games they like to play, which we determine through volume of play and regular surveys of our guests," Thompson said.

Revenue from participation slots account for a sizable percentage of IGT’s earnings. Analysts thought Harrah’s would return the games to the casino floor in exchange for a revenue share reduction.

Wachovia gaming analyst Brian McGill told investors Harrah’s also removed participation slots in its Atlantic City casinos.

"The experiment has given Harrah’s a significant amount of data to work with to make decisions on participation games in other markets," McGill said. "With this in mind, we were not surprised to see Harrah’s pull out a significant number of Wheel of Fortune games."

Some analysts speculated that IGT and rival slot company executives are getting nervous. If Harrah’s reduces its participation game costs, other casino operators may take a similar tack.

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Missouri voters will have a chance to end the state’s loss limit, under which gamblers may only wager up to $500 over a two-hour period. Approval of a November ballot initiative would remove the loss limit and add 1 percent to the state’s 20 percent gaming tax, generating more than $130 million for education.

Early polling favors passage. Still, Missouri casino operators, such as Pinnacle Entertainment and Ameristar Casinos, are expected to mount a marketing effort supporting the initiative.

Howard Stutz’s Inside Gaming column appears Sundays. E-mail him at hstutz@reviewjournal.com or call 702-477-3871.