New leader of gaming equipment manufacturer confronts challenges

With the casino industry setting revenue records left and right, it’s also an exciting time for gaming equipment manufacturers, the behind-the-scenes companies that supply the slot machines and technology that make casinos unique.

The industry has a unified voice in the Association of Gaming Equipment Manufacturers. The Las Vegas-based organization is a nonprofit international group representing manufacturers and suppliers of electronic gaming devices, lotteries, systems, table games, components and support products and services.

When longtime AGEM executive director Marcus Prater retired, association board members tapped Daron Dorsey to be the new leader of the organization. Dorsey served as an officer on AGEM’s board through his role with Ainsworth Game Technology, where he was general counsel and group compliance officer.

“It’s an exciting time for AGEM,” he said in a recent interview. “I’m glad I’ve been a part of the gaming supplier sector for some part of my professional career and I’m excited about where it can go. I love to be a part of telling that story in the future.”

The Review-Journal talked with Dorsey about AGEM’s role and issues facing gaming manufacturers. Responses have been edited for brevity and clarity.

Review-Journal: What are AGEM’s responsibilities in the gaming industry?

Dorsey: AGEM is there to provide a voice and an advocacy effort on behalf of the gaming supplier sector. What happens a lot of times is when people think about gaming it’s a very, very large sector. When people think about gaming, they think about the casino or the customer-facing or retail component. AGEM is really oriented around those suppliers, the ones that create and manufacture the products and deliver the services and create technologies that allow gaming to operate. It’s the business-to-business component of the commercial or otherwise gaming sector. AGEM is there to provide a specific voice and vehicle for that supplier or technology side of the regulated gaming space. That includes technology standards, regulatory standards and regulatory outreach efforts. The ebb and flow of that supplier side of the gaming industry that needs its own unique voice from time to time, separate from some of the customer-facing or retail casino components of the gaming sector.

How many members does the association have and what types of companies belong to AGEM?

We’ve got typically a flow of around 160 and 180. The types of companies that belong to AGEM, the voting member companies, are companies that are what we would term manufacturers. They’re the ones that create, develop and build gaming products and technology. They have nonrestricted licenses from all of the different regulatory jurisdictions across the world. The large companies like IGT, Aristocrat, Light & Wonder, Konami, Everi, Ainsworth, AGS, Novomatic, Merkur Gaming, all of those global names that you would think of as gaming manufacturers and suppliers. Associated with that are probably 100-plus associate members that are companies that are suppliers to those suppliers. They’re part of the gaming supplier sector by providing technology, products or services that are ancillary to part of that gaming supplier ecosystem. That includes chair companies, computer technology, peripherals and banks, financial institutions, accounting firms and law firms. That includes computer technology involved in the manufacturing side.

What are some of the issues facing manufacturers?

The supply-chain issue is a very large bucket, but also it’s the economy and economic trends and discretionary income spending for our customer base, and when I say “our,” I mean the gaming supply sector. A lot of the health and success of this business relies and depends on the health and success of our customer base, and that’s the end casino operators, the commercial casino business and the interactive space or whatever you want to term it. If there are economic forces that their customers may be spending less, they may pull back in spending about refreshing new products or the appetite for how much new stuff they’re looking for, how many new products and how much replacement they’re looking to do. The overall economic picture, because the casino business is discretionary income spending, has an impact all the way down the line, not just for commercial operators but also that’s our customer base as the supplier sector and we’re all watching that. So those headwinds affect everybody in the gaming industry.

Are there goals the association is trying to accomplish in 2022 and beyond?

One big goal our association is trying to accomplish in ’22 and beyond is trying to shine more light and gain a little traction on the marketplace. We have concerns with unregulated and illegal gaming, especially in the U.S. and Canada. It’s a very large issue that continues to get larger.

We’re trying to work with any state legislators or state associations that are trying to deal with that problem. We’re trying to work hand in hand with the (American Gaming Association) and federal law enforcement about those issues. It’s a multibillion-dollar problem and it continues to get larger and we want to continue focusing efforts. We want some more efforts or would like to see more efforts addressing that issue because it has long-term implications for the regulated gaming space and the time to do something about it is now, if not yesterday.

Are there specific styles of games that are more successful than others?

Not from my perspective. I think a lot of that is driven by different demographics and customers and where they are located and what they want those products to be. When you say traditional slot machines, that’s a long research-and-development cycle and there are a lot of creative people working on new concepts and themes. The technology in gaming devices today is amazing compared to where it was 10 to 15 years ago — what can be done with those and how they can be adapted or can be more interactive with players to provide a better experience. And it’s not just the traditional slot machine. You’ve got electronic table games and a lot of other technology-driven devices that take some of those core gambling games, whether they’re card-based games or table-based games, but using technology has allowed so many ways to make them more efficient, more fun, more engaging or more interactive for players while providing economic opportunities for casinos.

Why have skill-based games had so much trouble gaining traction?

There was a lot of that talk and a lot of companies spent a lot of energy and resources to get those items to the floors. I just do not know if it’s the volume of people that were interested in those games that maybe didn’t come to pass. There are people that would be interested in those, but maybe not a huge groundswell of customers interested in them. At the same time, I think a lot of it is driven by the customers, meaning the supplier industry’s customers. They’ve got a finite amount of floor space and they want to put products out there to get the most out of that floor space and the things customers are looking for. It didn’t seem there was as much traction or as much opportunity as everybody expected.

Why do you think the gaming manufacturing industry is as strong as it is right now?

It’s the recovery overall from the gaming side — the customer base of the supplier side, their success and health is the primary focus. Because they have done so much better in the past 18 months, that success has rolled over and ultimately resulted on the side of those supplying the products to them. So their health and their success has gotten there. But at the same time I’ll tell you that gaming and the gaming supplier sector is a very sophisticated business. When 2020 happened … suppliers and equipment manufacturers took a lot of steps to try to update some of their processes, making them more efficient, make them more technologically manageable. Some of those steps and strategies bore fruit.

Gaming equipment isn’t just slot machines; what other equipment do manufacturers offer?

Because of the technology interface, you have not only the slot machines … you’ve got all kinds of electronic table games and related gaming opportunities on the casino floor, but you also have floor management systems. You’ve got a lot of technology that addresses player tracking and how they manage those relationships with their customers and how they manage a floor. You have ways now with technology for how money is recorded and how transactions are processed and paid and money is moved around in various forms because in this regulated system it’s about tracking every single play, every single dime, every single dollar that flows through or across a gaming device or across a table.

We’re seeing more cashless gaming systems, too.

Absolutely. That’s another area that something is migrating toward, but at the same time there’s not just technology but legal and regulatory items, some forks in the road that everything has to work through to make that process more efficient. If more customers are wanting that cashless technology, the supplier sector is going to figure out solutions to make that possible because that’s what the casino customers want. Think back 20 years and we heard coins in casinos all the time. Now we have no coins.

Do you ever see a time when players will be able to draw directly from their bank accounts and put money on the table?

I don’t know. That’s a large policy-related question. If there were some manageable parameters around that, maybe, possibly. I wish I had a crystal ball to see. It’s difficult. A lot of companies would want to do that, but it also requires a lot of legal and regulatory change in order to make that work.

And responsible gaming advocates would be all over that.

Absolutely. That’s just how you do it, but you also need to look at why and what parameters you need to do, or is it something that really needs to be done. Those are the other policy questions that have to be answered. AGEM does have responsible gaming as part of its mission statement, not just supporting philanthropic or charitable endeavors, but also responsible gaming efforts. We have been involved in responsible gaming for decades.

Are esports a part of the AGEM universe?

Esports is not directly involved, but as esports become a more regulated product in a lot more jurisdictions, I absolutely see that as an opportunity if people want to join or participate in AGEM. We’d love to have those regulated companies take part in it.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.