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High-tech slots to ‘dominate’ casinos

Sep 9, 2003 4:54 AM

Over the past few years, casino customers have seen a dramatic change in their beloved slot machine. Besides going from reel spinning, one-armed bandits to high-tech video gaming machines, the modern slot has become an entertainment center with bonus features, stereo sound, advanced graphics and ticket-in, ticket-out technology.

Those trends should continue, as well as others such as the accelerated turnover of slot games in a casino, the expansion of wide area progressives, the proliferation of cashless slot systems, the increasing acceptance of participation or leased slots, and the further expansion of multi-line, multi-coin of low denomination slot machines, such as penny and two-penny slots.

The notion that a casino’s slot machine inventory is turning over at a rapid rate is good news for players, as well as the manufacturers.

Customers like to see new machines on the floor because it gives them something new to play. And manufacturers obviously like to replace machines on the floor because their sales are stimulated.

The result is a slot floor that is "younger" than ever. "We are rapidly replacing many of the machines that don’t seem to attract customers any more," said the slot manager at a Strip casino. "Of course, there are a few old stand-bys. But the floor is about 50 percent filled with machines that are less than two years old."

The replacement cycle for slots on the casino floor took a dramatic turn last year. Surveys indicate that 26 percent of floor managers said over half their machines were five years old, a significant increase from 2001, when 41 percent indicated their slot floor was more than five years old.

Additionally, reports indicate that casinos plan to replace a large percentage of games this year. In 2003, 38 percent of casino managers polled said they planned to replace 15 percent of their games versus only 24 percent who said they would replace 15 percent of their inventory in 2001.

Although "cashless slots" are still a relatively new casino phenomenon, they could be the norm in virtually all U.S. casinos within at least three years, according to the president of the world’s largest slot manufacturing Âí­company.

"I would say the three-to-five year time frame is probably a good one," said Tom Baker, president and CEO of International Game Technology (IGT). "That’s probably a timeline that makes sense for the roll out of cashless (slots)."

Baker said the task of replacing coin-operated slot machines with "cashless" machines ”” those that print tickets that can be redeemed or played into another machine ”” might be similar to the changeover to bill acceptors in gaming machines.

But changing to cashless slots would be a bigger endeavor for casinos because it requires a bigger investment, Baker said.

"Cashless is a bit bigger commitment in that it possibly involves a system changeover and adjustments in current player tracking systems, and so on," Baker said. "So the commitment may be a bit bigger for some of the casinos."

Of the 700,000 slot machines in North America, IGT officials estimate that 400,000 of them could be replaced with cashless versions.

Besides the obvious advantages of cleaner hands and less hopper fills, slot tickets facilitate changing denominations.

"That’s a considerable advantage, when players can change the machine’s denomination from 1-cent and 2-cent to nickels or quarters, all the way up to dollars," said Don Sterben, general manager of Terrible’s Casino in Las Vegas.

While it’s relatively easy for new casinos to stock the floor with ticket-in, ticket-out slots, it will take awhile for existing machines to be retrofitted with cashless sytems.

Actually, about 39 percent of all casinos have some cashless lots, although only 8 percent of existing casinos have over half their slot floor converted to cashless games.

The trend to convert slots to cashless has been fueled by the major operators: Park Place, MGM Mirage and Harrah’s Entertainment. As these companies have committed to the changeover, so will the smaller operators.

Wide area progressive slots, such as Megabucks and Wheel of Fortune, seemed to reach a peak a couple years ago, but recently there has been renewed interest in these games, which could expand dramatically this year with new players such as Aristocrat and Bally’s.

In a survey this year, about 40 percent of slot managers said they intended to devote 6 percent of floor space to wide-area progressives, a number that was up from 30 percent of managers polled last year.

The decision to devote space to progressives is based on the perception that people like to play them: about 55 percent of slot managers said these slots are more popular than non-progressives, as opposed to 48 percent who felt that way last year.

Casinos, slot makers participate in revenue

Not long ago, the mere mention of "participation" slot games was enough to make a casino manager cringe. After all, how dare the slot makers suggest leasing instead of selling their machines to the casino, and collecting a participation percentage of the winnings in the process?

But times change, and so has the attitude of casino bosses, many of whom now readily accept sharing revenue with the slot manufacturer.

"It makes sense to lease the machine, especially when its average shelf life has dropped to about two or three years on the casino floor," said the manager of a popular locals casino. "Plus, with machine costs approaching $10,000 apiece, we can avoid investing in games that may or may not catch the players’ fancy."

Recently, the games that have caught the player’s fancy have been the most popular participation games: Jeopardy, Monopoly, Wheel of Fortune, The Addams Family and I Dream of Jeannie, to name a few.

Making a serious challenge to IGT’s dominance of the leased games market is WMS Industries, which turned the casino community on its ear in 1999 with the introduction of its Monopoly-themed slot machine. Since then, WMS has skyrocketed to become the No. 2 manufacturer of slots in the U.S.

Not-so-cheap slot thrills

Not long ago, the nickel slot machine was considered the ugly duckling of the casino, which kept just enough of them to satisfy bankroll-challenged players who were content to plug away, a nickel at a time.

Well, times change, and so have the fortunes of nickel slot machines. In Nevada, players wagered more than $20 billion on nickel slots for the fiscal year ended June 30, 2003.

The bottom line for Nevada casinos is that the ugly duckling has evolved into a cash cow.

So how did this unlikely metamorphosis take place?

The nickel slot’s rise to prominence is the result of two factors.

First, manufacturers developed electronic games that accept a much wider range of bets than their mechanical ancestors. The range of bets now available on nickel slots can be anywhere from 1 to 90 coins (5 cents to $4.50), although the industry standard has become a maximum bet of 45 coins ($2.25).

Secondly, manufacturers are building much more compelling games. Starting with WMS Gaming’s "Monopoly," modern slot machines typically feature brilliant graphics, stereo sound effects, bonus rounds and usually an interesting game plan to keep customers interested.

In addition to the new wave of multi-line, multi-coin machines, multi-game machines have helped fuel the popularity of nickel play.

"With the new machines, players are betting up to 50 hands of video poker at once," says Steve Weinberg, an analyst with the Nevada Gaming Control Board. "Over the last three or four years we’ve seen the rising popularity of multi-game machines helping to stimulate increase in gaming win for nickel machines."

Clearly, Weinberg adds, the nickel machine is no longer strictly for low-Âí­rollers.

"Players are dropping in $20 bills at a time," he says. "It doesn’t seem to matter they’re playing nickel machines. The public continues to eat them up."

Following on the heels of the nickel slot’s popularity is the advent of penny and two-penny games. Manufacturers have discovered that there’s a large market of customers wanting to play games of a penny denomination.