Slots not likelyto lose their pull!

Sep 17, 2002 10:14 AM

   Taking a line from Hasbro’s popular Monopoly game, slot makers are “sitting pretty.” The reason? As casinos continue to spread throughout the country, the demand for slot machines continues in record levels.

   Some of the most popular casinos report that their gaming revenues are fueled by slot players. Station Casinos, for instance, says that 85 percent of its revenue comes from machines, of which 65 percent are video poker games.

   Operators of tourist casinos, such as those on the Strip, report a larger percentage of reel slots than poker machines, but their slot machine revenues are in the 65 percent to 70 percent range.

   The prospects for slot machine growth appear good, according to Bear Stearns, which recently completed an intensive study on slot machines — where they are and where they are going in the future.

   Among the interesting conclusions contained in the 117 page report:

”¡ Operators replace about 15-20 percent of their inventory of machines each year.

”¡ Ticket-in, ticket-out systems save about 40 percent in labor costs.

”¡ Slots are the most profitable game in the casino.

”¡ Gaming will continue to expand across the United States and around the world.

   The slot industry, according to the report, will continue to grow because of the expansion of gaming revenues, new technology, new suppliers and the regular replacement cycle.

   An interesting turnaround has been the decline in the number of “participation” games on the casino floor. These machines are leased to the casino, which pays a licensing fee and royalties to the manufacturer.

   When they were originally introduce, participation games created some animosity from several casino operators, who felt the manufacturers were unfairly benefiting from the casinos marketing efforts.

   But the machines became more generally accepted, especially the ones that proved to be huge money-makers for the casino.

   However, over the past couple of years, casinos have turned away from participation games, and sometimes commission manufacturers to build games to their own specifications.

   Bear Stearns analyzes the pullback in participation games, both from the product sales point of view and the operators’ position.

   Among the trends that should continue are the release of machines with secondary bonus games, and multi-media themes. These themes run the gamut from TV shows and movies to silly songs and unusual products.

   Multi-coin slot machines have also changed the way people play, and the trends toward multi-denomination games will continue.

   The growing popularity of multi-coin games have made it possible for the endurance of lower-denomination games, such as one cent and two-cent games.

   The growing trend of coinless games will continue. Coin handling in any fashion is a risk, as well as a labor intensive task. That’s one reason ticket-in, ticket-out and other coin-optional technologies will continue to make break-throughs.

   The slot floor of the future won’t look too different that today’s modern casino. Ultimately, however, the biggest change will be the cashless slot floor, which is virtually inevitable.

   In addition to ticket-in, ticket-out technology, other innovations will include smart cards and electronic fund transfer. As younger gamers grow up using ATM machines, debit cards and online shopping, they will be more accustomed to as well as receptive to electronic accounting.

   Other changes that appear on the horizon are downloadable games for the casino operator. But don’t expect them to appear overnight. According to some slot executives, approvals for such systems are not likely to come anytime soon.

   One reason is the strict oversight required by gaming regulators. Most states don’t allow casinos to access a machine’s EPROM chip, the memory that houses the game software, without a regulator present.

   With downloadable games, the situation becomes much more difficult for states to control. Thus it may be awhile before enough controls are in place for a casino to remotely write or change the internal workings of a slot machine.