Is time right for server games?

Apr 25, 2006 5:49 AM

IGT’s top executive Chairman T.J. Matthews calls for patience as followers of the industry’s dominating slot company await the impact — whatever it may be — of server-based or downloadable gaming.

Casino technology’s slow march toward the future continues, what with the recent approval in Nevada of rules for regulating this addition to the industry’s expanding catalogue of high-tech flourishes.

But what Matthews wants to dampen are expectations of an immediate transition. He does not want the anticipation of industry analysts to out-distance IGT’s ability to market this latest element of new technology.

And how will it be marketed?

Very carefully.

What with the average price of a new IGT machine around $15,000 and many casinos having recently spent millions on EZ-Pay systems, Matthews realizes most casino executives are in no hurry to speed up their equipment replacement cycles.

The "long period" of testing and development intended to eventually make server-based gaming a "must-have" for casino operators means the results will probably not be felt for several years — perhaps 2009 or even later.

The first-phase testing of IGT’s server-based slots at Treasure Island has been completed with second and third phases expected to begin perhaps by May and late in the summer. That tentative schedule is very much subject to change depending on what the still-to-come testing may show.

Customers playing the TI’s 20 or so test machines probably didn’t even know they were part of a test. There was no signage suggesting the games were in any way special. Capabilities such as the ability to change game denominations were tested.

Harrah’s is also running tests of its own at the Rincon Indian Casino in California with multiple manufacturers, including IGT.

The fact is, server-based games will probably be in use outside Nevada before they become prevalent along the Las Vegas Strip.

Some regulators — Missouri is a prime example — are said to like the notion of being able to centralize the control and content of all games.

The impact of downloadable gaming will be felt on a casino floor near you, eventually — but don’t hold your breath. Casino operators are not known for embracing new approaches to gaming without a lot of very careful thought. Many of these operators harbor the certainty that most of their customers feel the same way.

Which makes gamers and casino operators a bit more conservative than other business sectors.

As Navegante’s Larry Woolf notes, "Technology that we’re talking about as new is already very familiar in industries other than gaming."

Bellagio President Bill McBeath points out that customers who want nothing more than a satisfying gamble are not always in a hurry to welcome new high-tech concepts, but they eventually jumped to embrace the convenience of ticket-in, ticket-out slots.

The idea being that if it ain’t broke why be in a hurry to fix it?

But McBeath projects a high level of confidence that server-based games will eventually add a fresh spark to the dynamics of a casino floor.

"Things will not be so static," he said.

A senior official with another of the companies who could not be identified because he is not authorized to speak to reporters, speculated, "There is a definite market for it, but we’d probably never give downloadable games more than maybe 25 percent of our floor. What it would probably do is make some nice customer service features possible, maybe making it possible for a known customer to get his favorite games without moving around the casino."

Another veteran slot executive speculates that downloadable games may be particularly useful to smaller casinos without big budgets for changing out large numbers of machines.

"These games are almost certainly going to be leased," he said. "IGT or whoever is not going to be selling these things. They’ll use it to pump up recurring revenue. An owner could, for instance, say, here’s my floor, you’ve got it. Just tell me what it is going to cost."

Matthews says the schedule on which IGT is operating calls for additional trials this year as all parties stride toward a relative comfort level with the basics. He anticipates the introduction of "more functionality next year."

Among industry leaders who contributed their opinions to this piece, there is no sense of urgency. It will happen when it happens, they seem to say. Some executives have been down this road before.

Everyone remembers that the MGM Grand had dozens of ticket-in, ticket-out games when it opened in December 1993. The public’s reaction was a large ho-hum. The same machines had been previously tested at the Desert Inn with a similar show of disinterest.

MGM gave the issue a big corporate shrug and licensed the technology to IGT which eventually used it to create the EZ-Pay system that everyone had to have a mere half-dozen years or so later.

Speaking recently to financial analysts, Matthews was the picture of a man with all the patience in the world. The ultimate argument, the deal-maker, he suggests, will come when casino operators everywhere can see how much more marketing is possible with a "completely networked" slot floor.

Timing is everything, he might have also added.