IGT at the forefront of server slots

August 28, 2007 5:42 AM
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Editor’s Note: This is the second in a two-part report on server-based gaming. Last week we looked at how the system works and what it means to the casino and the player. This week, we examine the products, who makes them, when they will become available, their pricing and where the technology is headed.

As we pointed out last week, server-based gaming will dramatically alter how a casino’s slot floor will look and, more important, how it will interact with its customers, the players.

To quickly recap, a server-based slot floor would feature generic machines (like computer terminals) that are linked to a central server, which would be able to alter the game content, denominations and other game characteristics, as well as download marketing and rewards programs tailored to specific players.

The most notable aspect of server-based gaming, also called "downloadable slots," is that the server would contain a library of games that could be loaded into the slots instantaneously.

Equally important, the technology will be able to deliver package deals to customers, offer players multi-level games that can be accessed from different locations and times, stage casino-wide slot tournaments to better use "down" time, and alter games’ denomination and make-up to match varying demand and demographics.

Currently, IGT has been the driving force behind developing server-based gaming. At last year’s G2E gaming conference, IGT unveiled sophisticated versions of its technology, and has been working with gaming regulators in getting the technology approved for widespread distribution.

It is expected that IGT will begin installing server-based slot systems in U.S. casinos in about six to 10 months.

According to a study by Goldman Sachs, IGT is about three years ahead of any manufacturer of server products, but the slot giant hasn’t been operating in a vacuum.

IGT has partnered with software companies like Walker Digital, which will provide a variety of applications for a networked casino floor.

In addition, WMS Gaming has created revolutionary new games designed to be delivered through IGT’s server technology. Some of these games were showcased on IGT machines at G2E.

One of WMS’s more intriguing offerings is a Star Trek-themed progressive game in which players progress to different levels. Because of the server technology, a player can leave the game, and return later to pick up where she left off.

The uncertain nature of the game is expected to pique players’ interest as they encounter new adventures and bigger prizes along the way.

IGT’s biggest competitor, Bally Technologies, is working on a server system, but it isn’t expected to be marketable for another three years.

Once the systems become available, there will be several formatting and pricing options available to the casino manager.

The "generic" slot machines may be priced at about the same amount as existing slot machines — about $10,000 to $12,000 per machine.

The creative financing (and higher profit margins!) of server systems will occur with sale, leasing or profit sharing of the game software and network software that will define the amount of services available to the player.

Software is usually purchased outright or leased under a licensing agreement. If the server model follows current practice, games should cost about $2,000 each.

If the operating system and software are leased under a license agreement, the annual fee should be about 3 percent of the machine’s net revenue, according to Goldman Sachs estimates.

Regardless of the cost and timeline for the roll-out of server-based slot systems, it remains to be seen how players will react to the new technology.

Only 10 percent of slot managers surveyed by Goldman Sachs believe that offering a larger variety of games would be a significant customer benefit. And only 7 percent said they thought that customers would like the new technology better than existing systems.

Nonetheless, the slot managers seemed bullish on downloadable games — they cited better efficiency (48 percent) and more profitability (22 percent) as the top two benefits to server-based games.

It seems clear that marketing, efficiency and profitability are important factors to slot and casino managers.

Now, if they can only demonstrate to the player that she would benefit as well, server-based gaming could live up to all the expectations.

What do slot managers
think of server slots?
Slot managers’ survey responses
to anticipated benefits
of downloadable slots
Better efficiency 48%
More profitable 22%
Variety of games 10%
Customers would like it 7%
No benefit 5%
Better marketing 2%
Other 7%

Source: Goldman Sachs