Slot debate rages on!

Sep 23, 2003 8:08 AM

As in past conferences, slot machines took center stage at last week’s Global Gaming Expo (G2E) in Las Vegas.

And, as in the past, the lingering dispute between slot makers and casino operators over whether manufacturers should "participate" in casino revenue continued.

In a sense, the dispute follows the "What came first ”” the chicken or the egg" riddle.

Casino operators, on the one hand, say that because they spend millions to build casinos and attract customers, they have the right to purchase machines and retain all of the revenue.

"If a dollar comes into our casino, we don’t want to send 40 cents of it back out the door," said Bruce Rowe, who recently served as Harrah’s vice president of slot operations.

More to the point, Rowe added, casinos would rather pay $14,000 for a slot machine and own it, rather than pay $75 a day in lease payments over a five-year period for a total cost of about $135,000.

Slot manufacturers counter that they spend millions of dollars in research and development, and often have to pay periodic licensing fees for "intellectual property" such as a TV game show or celebrity’s likeness, and therefore are entitled to either lease the machines to the casino or participate in the machine’s income.

"We try to listen to the market, and we don’t ignore the operators," said Ward Chilton, vice president of sales for IGT. "Sometimes we can’t sell a game because of intellectual property issues in which IGT is only a licensee and we don’t have the right to sell the machine."

Chilton said about 25 percent of IGT games are revenue sharing games, and many of those are wide-area progressives such as Mega Bucks and Wheel of Fortune, in which the casinos pay from 3 percent to 6 percent of the revenue to IGT.

Another slot manufacturer, Aristocrat Technologies, said about 10 percent of its income comes from recurring slot revenue, and about 20 percent of its slot products are available for lease or purchase.

"There’s actually a segment of the market that wants to lease the product," said Kent Young, vice president of marketing for Aristocrat.

That segment often includes tribal casinos that don’t want to invest a lot of capital in slot machines that usually carry a price tag of at least $10,000 apiece.

Regardless of whether the games are purchased or leased, casino operators want machines that will last at least three to five years on the casino floor.

"There are too many new games, and too many new wide-area progressives," Rowe said. "I think you’ll find that the best slot games are the ones with ties to gambling.

"For instance, Wheel of Fortune has a game show element that relies on gambling. Puzzles also lend themselves to games of chance," he said.

Rowe said perennial losers, such as race car slots and other themes, are "miserable failures" because they lack the link to gambling-style games.