Flashier slots revel in their day at G2E, but patrons will have to wait for games
Casino industry insiders were enticed by flashy slot machine prototypes and high-tech displays at last month’s Global Gaming Expo. Gamblers, however, won’t be able to sample the new games until at least 2009.
Slot machine floors won’t change much during the next 12 months, gaming analysts said following the three-day trade show at the Las Vegas Convention Center, which attracted some 30,000 attendees.
Several new game themes displayed at the show, such as a slot machine from Chicago-based WMS Industries based on the television series “Star Trek,” could reach casinos in the next 12 months. Just before G2E, Australian-based Aristocrat Technologies distributed a slot machine based on television’s “The Sopranos” to a handful of casinos.
An industry-changing slot machine replacement cycle fueled by futuristic server-based gaming technology is still more than a year away. For the third straight G2E, server-based gaming, sometimes referred to as downloadable technology, dominated talk and interests. Most of the major slot machine manufacturers had some type of server-based gaming display in their booths, showing interested slot executives the technology’s potential.
Server-based gaming is expected to offer casino operators greater flexibility in managing their slot machine floors. Changes to a slot machine’s games, denominations, bonus payouts and promotions take place from a central computer server rather than requiring technicians to perform the work manually.
Casino slot machine executives are fascinated by server-based gaming’s potential, but they have two concerns: timing and cost. Neither concern was answered clearly during the show.
“Operators were searching for better color on pricing models and we found no one willing to commit to anything until that is cleared up,” Stifel Nicolaus gaming analyst Steven Wieczynski said. He viewed many of the server-based gaming displays with different casino operators.
Kathleen Harris, managing director of corporate slot operations for Las Vegas Sands Corp., said cost is her company’s underlying concern. Harris said each manufacturer she talked with had a different vision and a different level of strategy for server-based gaming.
One manufacturer focused on customer service. Another touted ways to enhance revenues. A third company told Harris its system provided superior slot machine games and content.
Getting the manufacturing industry on the same page, Harris said, is key to the technology’s financial success.
“I think there is still a big black hole because there are several different pieces,” Harris said. “The jury is still out as to what those pieces mean to revenues per square foot (for the casino). Ultimately, the question remains as to how the functionality of the product can be integrated so that it does not detract with what the player is there to do, and that’s to game.”
Jay Fennel, corporate director of slot operations for Station Casinos, needs to know the costs for server-based products immediately. He expects to be placing orders for some 2,000 slot machines in the middle of next year the company’s $675 million Aliante Station in North Las Vegas, which is opening at the end of 2008.
Fennel needs to put slot machines on the floor that have the latest technological advancements, but that aren’t so advanced that they scare away customers, who are expected to skew somewhat older.
What he saw at the G2E, he said, is at least four or five years away from the casino floor.
“From a technology standpoint, we’ll put in games at Aliante that are server-based for what we know of the product today, but we can’t shock the customers,” Fennel said. “The challenge is to balance some of the new-look games with games we know our customers will want to see.”
Analysts speculated that one of the new casinos under construction in Las Vegas, such as Aliante Station or MGM Mirage’s $7.8 billion CityCenter development, opening in late 2009, could be the laboratory for server-based gaming. Once a large-scale server-based gaming rollout takes place, casino executives will be watching for customers’ reactions.
“Many operators will sit back and take a wait and see approach with the technology,” said Brian McGill, a financial analyst who follows gaming for Wachovia Capital Markets. “It will need to be proven that there is a positive return for the operators to go ahead and install it.”
In its G2E booth, Reno-based slot machine manufacturer International Game Technology displayed the product’s behind-the-scenes capabilities, which would let casino operators direct bonus features and other marketing techniques to customers.
IGT also displayed how its sever-based system could interact with machines from other slot manufacturers. The company plans to open a new technology center in Reno after Jan. 1 dedicated to server-based systems.
Goldman Sachs gaming analyst Steven Kent said IGT showed G2E attendees how a future casino may appear with server-based gaming.
“This is critical as it starts to show the operators how they will be able to increase revenues, which is ultimately necessary to drive pricing for IGT and spark a replacement cycle,” Kent said.
McGill expressed caution for investors looking at sever-based gaming as a near-term catalyst for boosting the values of the publicly traded gaming equipment manufacturers and suppliers. Nevertheless, he’s sure server-based gaming will reach casino floors.
“The technology will eventually drive a replacement cycle, but it is likely to take longer than most expect,” McGill said.
Earlier in the decade, casinos nationwide replaced several hundred thousand slot machines with ticket in-ticket out technology, allowing gamblers to wager and win jackpots through cash vouchers. Server-based gaming, if successful, is expected to have the same impact on casinos, something slot machine company executives point out when discussing future earnings potential.
Over the next year, Wieczynski expects some of the manufacturers to announce server-based gaming placement deals with casinos as a way of driving up stock values.
The server-based products displayed during the 2006 G2E were, “somewhat remedial,” McGill said, adding that investors were disappointed.
He thought manufacturers at the 2007 G2E displayed more capabilities and features, saying, “It was still far from the final offering that should be available for sale.”
Contact reporter Howard Stutz at hstutz@reviewjournal.com or (702) 477-3871.
