2015 Gaming Industry Forecast: Part 3

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Drazen Alcocer
Vice President
Biometrica Systems Inc.

The gaming industry continues to change and evolve and with it we have seen new regulations and laws emerge. Casinos as a whole have come under much scrutiny because of security practices, operation procedures and money laundering scandals. However, advances in technology and the corporatization and globalization of the gaming industry have changed the business. Technology has also changed the tools available to casinos and, unfortunately, not all casinos have kept pace with these developments, leaving them open to theft, cheating and scams while no longer being effective at protecting their properties.

Because of these changes, 2014 has been a strong year for Biometrica Systems Inc. With more than 185 casinos as current clients, we lead the way as the industry’s finest providers of games protection and casino surveillance with more than 15 years of experience. We continue to be the trusted source for game protection on the casino floor. Our latest iteration of our flagship product—Visual Casino 6—has been equipped with integrated software modules that work together seamlessly to collect, store, share, retrieve and analyze critical information in order to make more informed decisions in controlling and protecting your casino assets and operations. We continually upgrade and enhance products by listening to our customer base to bring the most advanced and effective method of providing surveillance, security and casino compliance and casino operations in the casino industry.

Looking ahead to 2015, we will continue this trend with Visual Casino 7 bringing in more innovation and better features for our clients. Our latest and newly revamped Incident Reporting module has been improved and specifically designed around what casinos want—to automate the tasks that surveillance and security operations face on a regular basis. With one of the largest databases in the industry protecting a sizable amount of all casino revenue, Biometrica Systems Inc. will continue to improve, innovate and lead the industry with better practices and products.

Our goal at Biometrica has and will always be to stay up to date with the current industry trends and pass that value on to our clients keeping them informed, secured and up to date with all rules and regulations.

Danny Gladstone
Chief Executive Officer
Ainsworth Game Technology Ltd

The slot machine business has been really challenged in the last three years. Coming out of a worldwide financial crisis, there has been less capital provided to slot machine managers, most notably in North America. In many markets, gaming is flat compared to food and beverage in these operations, making the conditions even harder.

All operators agree that gaming machine floors need to be refreshed constantly to keep their players entertained. The larger and longer-established companies have probably felt the effect more than a company such as Ainsworth, and this could be the reason behind all the acquisitions and mergers.

I believe in 2005 and 2006 the number of slot machines sold in North Americas was more than 140,000—it is probably half that today. Ainsworth has been striving to carve a small footprint in this market by providing innovative games in distinctive hardware designs and will continue to develop at least 45 new games each year for sale to each of the markets we sell into.

The gaming industry has changed considerably over the last 12 months with a number of high profile acquisitions. For Ainsworth, the impact of these in Australia will be minimal, but in the Americas the effect could be most promising.

I believe that the integration of these larger companies will provide Ainsworth with a distinct opportunity. Our business plan is based on the supply of quality product, and we have no other distractions but to get on with the job. While Ainsworth is not opposed to making a future acquisition, any such action would be to acquire a product that does not directly compete with our current business.

Ainsworth is in the process of constructing a purpose-built factory on 23 acres in Las Vegas for an approximate cost of $30 million. This facility will be 300,000 square feet and give us the opportunity to add more R&D to service the expected growth.

The other relevant area in gaming at the moment is online and social, and Ainsworth has strategies for both.

Looking at online opportunities, significant progress has been made during 2014 in bringing together a comprehensive digital product offering in the real money and social casino online markets. In June of this year, Ainsworth was awarded a license in Alderney, which followed the decision to use Comtrade to supply remote gaming server technology. This will enable the establishment of a major presence together with brand recognition in the regulated markets of the U.K. and Europe.

We are pleased to have partnered with Playtech Limited, an international designer, developer and licensor of software and services for the online, mobile, TV and land-based gaming industry through an online content licensing agreement. Ainsworth will feature its most popular game titles across all Playtech platforms in regulated U.K. and European online sites for desktop, mobile and tablet devices allowing the establishment of business to business offerings. I’m pleased to report systems integration is now well underway to incorporate the Ainsworth Gameconnect™ RGS, with the expected release on track for the first 10 games in the second half of 2015.

To complement the move into real money online gaming, Ainsworth could not ignore the fast-growing social gaming market estimated to reach $5 billion by 2018. As previously announced, a joint venture has been entered into with 616 Digital LLC, a mobile social gaming operator, integrator and game developer. This partnership has enabled the fast tracking of the company’s ability to enter this market with the launch of the Players Paradise casino scheduled for January 2015. While our timing to enter this market is behind our major competitors, it has provided Ainsworth with the ability to develop a quality mobile offering complete with improved mobile technologies which now account for more than 50 percent of revenues in this online segment. In 2015, the company plans to launch a second social casino, which will provide unique mobile and tablet game offerings.

David Lopez
American Gaming Systems (AGS)

Changes… that is the best way to describe 2014, and I am sure there are even more to come in 2015. 2014 has been an unpredictable year of monumental events across the industry, and AGS has played a small but significant part in the changing landscape. The company was acquired by affiliates of Apollo Global Management, a private equity firm, shortly before I came aboard in February 2014. A few months later, we acquired Colossal Gaming, a successful game design studio and slot manufacturer, and restructured our slot development to take advantage of the new talent we had just brought aboard. As a result, our studios in Toronto and Las Vegas are currently working in tandem to bring some of the best products to market.

2014 witnessed AGS’s official entry into the table games business with the acquisition of Casino War Blackjack, Inc., but that was the just tip of the iceberg as we have added a number of promising new games since that first acquisition, along with arguably the industry’s best talent to lead that business for us. 2014 has been about both portfolio and jurisdictional expansion, all the while focusing on attracting and retaining the top-notch talent we need to move our company forward in both the slot and table games space in 2015 and beyond.

Although many of the manufacturers had major announcements this year on the M&A front, change will really start to take effect in 2015. While the larger suppliers are consolidating and tightening up their business models, smaller suppliers such as AGS are beginning to really ramp up. In the traditional slot business, the “Big Five” aren’t going to exist in the same context as we have known them, and a new “five”—or more, or less—are competing to fill the open space. Consolidation in the top tier of the supplier space, although both a near-term distraction and long-term opportunity, was likely a necessity in a slot industry challenged by a lagging replacement cycle, overall weak industry macros and occasionally constrained operator CAPEX.

The shifting industry dynamics have resulted in the need for new products, fresh perspectives and a different approach to doing things. It will take a while for the companies going through consolidation to find their balance, and that leaves opportunity for smaller suppliers to step up, act nimbly, establish strong cultures and teams and fill vacancies with proven industry veterans and burgeoning talent. AGS is doing just that and, as a result, we are especially well-positioned moving forward.

In summary, we are confident that 2015 will be a year in which we see new rising stars with more diverse product lines and unique value propositions step up to earn share. The competitive environment will be fun and fierce and that is certain to do one thing—benefit our casino partners in the long run. As one of those smaller suppliers, we consistently listen to our customers and we are capable of delivering exactly what they need to complement their floors. We firmly believe that our customers are looking for long-term strategic partners whom they can trust to help them navigate a difficult operating environment and maximize their performance. Although we are starting to see some rebound, business has been tough for most operators and suppliers over the past few years.

To successfully address the challenges on the horizon, we need to come together with our customers, focus on solution-based products and services, deliver what they need to unlock the potential of their individual businesses and effectively breakthrough with the next generation of millennials—perhaps one of the greatest challenges the industry has seen in decades. No easy task, but AGS is raring to go and strongly suited to answer the call to action from the industry and our customers.

I have no doubt of our ability to exceed expectations; the team at AGS consistently exceeds mine. Keep your eye on us in 2015.

Jamie Odell
Aristocrat Technologies Inc.

This year, Aristocrat successfully completed the five-year turnaround program we announced back in 2009. For us, 2014 was a welcome opportunity to reflect on our progress and recommit to our vision to deliver customers and players “the world’s greatest gaming experience, every day.”

There’s no doubt that we operate in a fast-changing industry, driven by rapidly improving technology and evolving player preferences. Even so, it’s hard to recall a more profound year of change in the U.S., as global suppliers consolidated and market conditions continued to be challenging.

That’s why Aristocrat’s approach has always been about focusing on the things we can control, and ensuring that we deliver the most competitive and compelling products for our customers whatever else may happen.

At this year’s G2E we were very encouraged to receive such positive feedback from customers and the broader industry on our North American portfolio, which is approaching full strength off the back of two years of significant investment in great creative and technical talent and technology. Our team is proud of our blockbuster licensed and proprietary gaming operations titles such as Walking Dead™—named the 2014 “casino product of the year” at the annual Global Gaming Awards, and the mighty Buffalo™, which was once again named the top performing slot game in North America in the Goldman Sachs Slot Manager Survey.

In important outright sales segments, Aristocrat has also been working hard to bring more choices to customers, with a portfolio of popular E*Series and J*Series™ titles, and of course our new Helix™, Arc™ and Behemoth™ cabinets, among other casino system innovations and other technologies.

Our acquisition of VGT will only deepen our focus on this part of the world. On a combined business basis, Aristocrat already derives more than 60 percent of total revenues from North America, and more than half my leadership team is now based in the U.S.

In terms of VGT, we look forward to appointing a permanent leader of the business soon and can only reiterate Aristocrat’s commitment to protecting the great games and customer relationships the VGT team has forged over two decades. I’ve been so impressed by the caliber and commitment of our VGT colleagues as I’ve had the opportunity to get to know them better in recent weeks. As I’ve said previously, this is the only major consolidation we’ve seen among suppliers recently that’s not built on cost savings. And in a year that’s seen more than $600 million in transaction-driven cost synergies called out by suppliers, it’s exciting and a real privilege to be spending our time with customers and focusing on serving them better, rather than being preoccupied with an internal, cost-driven integration process.

From a personal perspective, I’ve been very motivated this year to hear customers talk about how Aristocrat games are helping them engage players and drive their businesses. The recent appointment of Maureen Sweeny as Aristocrat’s chief commercial officer will accelerate improvements in our marketing, sales and customer service, and ensure we effectively deliver to you the leading games and casino systems portfolio that Rich Schneider and his team continue to develop.

Our team is absolutely focused on continuing to lift the bar for our U.S. customers—whether they are on the Las Vegas Strip, in a regional location, or a tribal customer in Oklahoma. We look forward to another year of shared growth and success in 2015.

Eric Meyerhofer
Chief Executive Officer
Gamblit Gaming

Sometimes it’s helpful to think about where we’ve been in order to think about where we are. The casino industry’s journey in the recent past looks something like this—five years ago we had the great recession, and basically everyone went catatonic. This has been followed by a drawn-out period of recovery, only to discover that consumers are going to be a bit more conservative with their wallets. As operators streamlined to adjust to slower and bumpier business conditions, along comes the future possibility of online gaming and the realization that it could come to touch, and possibly disrupt, the land-based casino business. From my perspective, these events have left a number of operators somewhat shell-shocked as they come to grips with what may be a break of the traditional casino business management model they practice, especially in the areas of investment to drive growth. Do we invest in more systems and ready ourselves for the online world, do we seek mergers or expansion in different markets, do we double down on our operations and invest in more creative EGMs or build more clubs, put in more tables? I think this is what is driving the challenging business environment for the casino gaming products industry as it stands today.

Another growing challenge is that the casino visitation demographic continues to migrate to a younger set with very different ideas about what they find entertaining compared to historic casino visitors. I saw in­­­ a survey recently that more than 70 percent of casino visitors are now under the age of 50, and we also know from data that visitors under 45 years of age don’t seem very interested in traditional slots, which take up much of the gaming floors today. I think that operators are realizing that they have too much of their revenue generation space dedicated to an older casino model, and while planning and experimentation with gaming operations continues, it should be expected that traditional equipment and system sales will be sluggish. Although full online gaming is effectively not possible in the U.S. (other than in New Jersey), it’s a factor operators are also thinking about when planning their investment dollars.

Rendering all of this down, it’s no surprise to see the wave of consolidation going on, and I would expect this to continue in 2015, albeit likely at a slower rate than the M&A activity of 2014.

The current conditions are very likely not the new norm, but rather a period of adjustment and realignment while the industry figures out what form it’s going to take in the next 20 years. Technology and a shifting demographic have caught a number of industries flatfooted, and I am confident we’ll see the casino industry adapt to meet the challenge, because casinos still provide some of the most exciting, high-energy places that are available for adults. I believe in 2015 we will see more evidence that casinos are planning to become more about being entertainment brands than just gambling houses; an appropriate response given the shifting entertainment experience demands of their visitors.

In short, I think 2015 will bring more consolidation and flatness to bumpy conditions for the supply side of the industry and operators alike. However all is not so glum. Once the industry makes its decision on what its remake is going to look like, we will see a sizable investment made in transitioning of casinos toward that new model, and that will be a time of plenty for the supply side of the industry as well as operators. Operators will engage more of their visitors in gaming experiences and not just nightclubs and the like. Electronic gaming should continue to be a high margin channel, if the penetration can be achieved. I am hopeful that 2016 could shape up to be a much better year as operators begin to lock and load on what exactly they intend to do to continue their entertainment relevance and as suppliers adapt their offerings to meet the direction presented.

Renato Ascoli
General Manager
President, Products and Services

Victor Duarte
Senior Vice President, Gaming and Content and Senior Vice President, North American Commercial Gaming

2015 will mark an increasing emphasis on technology as one of the biggest differentiators in the commercial casino industry. Our industry has been catching up to various trends in other sectors, with slot vendors using technology to overcome stagnant markets, slow replacement cycles and a more crowded gaming operations space.

GTECH has leapt ahead of our competitors with our True 3D™ technology, enabling the projection of glasses-free full color 3D images and animations. True 3D also represents an example of our response to the growing call for “value-added” features because of its unique immersive experience. Players are increasingly seeking to customize their own experience, and True 3D gives players control of the 3D intensity, volume, rumble and adjustable seating. The True 3D platform allows us to develop diverse game functionality and mechanics to appeal to a broad player base, and also potentially attract new players seeking a non-traditional gaming experience.

We recognize the need to develop games that attract a younger demographic, while satisfying the needs of the traditional player. With Zuma™ and Plants vs. Zombies™, our MaXVusion™ cabinet has bridged this gap, and will continue to do so with Bejeweled®, DEAL OR NO DEAL™ Las Vegas! and The Money Drop™. We’re also seeing more games that offer social-based game play on large bonus screens and multiple player seating. Meanwhile, GTECH’s core content offering is a balanced mix of new-to-industry game mechanics and evolutions of market-proven math models and game functionalities.

Over the last three years, we’ve seen the steady influence of sleek cabinet designs breaking the old molds. Manufacturers are also innovating on components such as button decks, marquee lighting, eToppers and high-definition displays. In addition, they’re pushing the envelope on the size of LCDs, and by extension, the size of cabinets. Thanks to the advent of low-cost LED lighting, lighting in general, especially synchronized event lighting, seems to be a central focus now more than ever.

Moving from land-based hardware to the mobile experience, while the United States has reached peak mobile ownership, the amount of mobile data consumed in the U.S. is expected to increase threefold between now and 2015. For casino operators, this creates both a problem and an opportunity.

Customers distracted by continuous mobile phone use have limited engagement, lower attention spans and are less likely to be persuaded to linger and to spend. They’re also harder to impress with game formats that are essentially unchanged from the same products their parents grew up with.

The opportunity is to re-imagine, re-energize and re-position the casino floor and the whole gaming experience. Casinos can now make gaming something the players take with them—accessible on demand on their smartphones while on the property.

While a few states have legalized online gaming to date, many others are considering legislation. As the online landscape evolves in 2015, casino operators can also take a first step by creating their own Play-for-Fun sites to establish an online identity and extend their brands across the digital world. They can offer players online promotions, tournaments and rewards that are redeemable at the bricks-and-mortar property, building deeper brand relationships.

Finally, we foresee a continuation of gaming industry consolidation in response to increased competition and the convergence of the aforementioned gaming channels. For GTECH, 2015 will be an historic year as we finalize the planned merger with IGT to become the world’s leading end-to-end gaming company. Our customers will benefit from best-in-class content, our unique ability to capitalize on convergence trends in the industry, industry-leading R&D efforts, our ability to more efficiently manufacture gaming machines, the enhancement of our system offering and leadership in the ability to monetize online play and expand the player base.

Patti Hart

We enter 2015 at one of our industry’s most exciting and transformative stages to date, with continued consolidation redefining the landscape of gaming. Consolidation will help rationalize industry costs against consumer demand. After this wave of consolidation, the industry can find a new equilibrium and operate with an emphasis on sparking and maintaining industry growth under a new paradigm. For the long term, we need to take a hard look at other forms of entertainment and determine how to be competitive with them. We need to be proactive if we want to promote the health of the industry and stimulate growth.

As we work to complete IGT’s merger with GTECH in 2015, we’re excited to create the world’s leading end-to-end gaming solutions provider. This merger agreement represents an investment in the future of the gaming industry while responsibly creating shareholder value.

As we lead and transform gaming entertainment, IGT remains focused on reaching new audiences and developing and distributing content to emerging platforms. IGT takes a “player first” perspective with exciting concepts such as skill-based gaming targeting a broader demographic. Our Video Reel Edge skill-based gaming provides players with the chance to earn points in the bonus round based on how well they play. IGT’s Atari Centipede plays just like the video game, and our new Race Ace puts slot players behind the wheel racing cars for points. 2015 provides us with continued opportunity to create skill-based experiences as we drive the evolution of gaming.

We must also reach a broader demographic of players who want to play anytime, anywhere. IGT is a content provider at the crossroads of technology and entertainment, and we will continue to distribute our content across the broadest platform available. We expect our successful momentum with social gaming to continue as we leverage IGT’s DoubleDown Casino to deploy the authentic casino gaming experience to a mobile or desktop environment. In 2015 we will premiere new Wheel of Fortune games on DoubleDown, providing a great way to develop player affinity for the games in the casinos, expanding our audience while helping our operator partners expand theirs as well.

As we look ahead we must seek out and embrace consumer trends if we expect to thrive among entertainment choices. As IGT continues to innovate, we will remain disruptive, pushing the boundaries of gaming entertainment. We believe this serves as a recipe for success for the entire gaming industry in 2015.

Elaine Hodgson
President and CEO
Incredible Technologies Inc.

Much of Incredible Technologies’ (IT) journey as a relatively new manufacturer in the gaming industry has been to learn and understand big picture universal truths. As a company, we continue our investment in experienced development leadership and have created in-house analysis tools that help our team design games with proven math models and engaging themes. Our rigorous performance testing program makes sure we only release solid earning games. Forward-thinking marketing strategy and a resolve to ask our operator partners to help us execute it has helped each theme realize its full potential on casino floors nationwide.

In 2014, IT followed through on many promises. We introduced our new Infinity® platform and U23 cabinet which features exclusive new content with the ability to run player favorite legacy games. The best compliment I received during the beta test of Infinity was that “it looked like a fourth generation product, not a second.” Our performance data and operator demand clearly show that the mixture of this cabinet’s new sleek design, increased quality in graphics and sounds, bank-wide lighting effects and our Simple Sign™ Display Kit definitely boosts overall player engagement and earnings.

I recently had an opportunity to visit with a very important and trusted customer. The customer told me, “In my career, this is the worst time to be a small manufacturer. There are so many of them in the market and casinos are buying less new product.” I am sure this is true. The good news for IT is that this is the environment we were born in and the environment we continue to grow up in. We have no memory of “the glory days” in this industry. We continue to develop and seek skills to succeed in “the demanding days.” We are now watching several of the large manufacturers consolidating and downsizing while we are experiencing controlled growth.

Looking forward to 2015, we have many more challenges to overcome to keep our market share increasing. The gaming environment is varied. Some regions are thriving while others are seeing oversaturation and weak consumer demand. We are tailoring our product offering to meet each market’s needs. Every casino attracts a different player mix and has different economic needs. As always, we will strive to work with each property to find the games and financial options that make business sense.

In 2015, IT aims to have an increased presence in the western region of the country, including Nevada. Plans are already underway to open a warehouse and technical facility in Las Vegas to better service our customers in that area. We will expand our field service department in order to keep our excellent service reputation as our footprint grows. We will thoughtfully and carefully analyze which jurisdictions to enter next. IT will not expand just for the sake of market share and the top line. IT will continue to focus on sustainable growth, maintaining a healthy bottom line, providing great customer service and a quality product offering.

Steve Sutherland
Chief Operating Officer and Executive Vice President
Konami Gaming, Inc.

The gaming industry has reached an interesting inflection point, driven by a recent confluence of developments and events. The rather rapid expansion of casino gaming into 39 of 50 states has resulted in several markets where supply outpaced demand. As a result, market corrections toward equilibrium are in process in markets such as Tunica and Atlantic City. In other markets, increased competition from across state lines has resulted in reduced market share and in some cases a more short-termed, conservative approach by operators to the replacement of aging gaming products on their floors. Coupled with an increase in the number of suppliers attracted by the expansionary market, this, in turn, created pressure on some suppliers to engage in merger and acquisition transactions in pursuit of potential synergies as a tactic to combat declining revenues.

Since its origination more than 14 years ago, however, Konami Gaming, Inc. has pursued a business strategy that is markedly different from the competition. Konami’s success can be attributed to the consistency of our leadership team with its core focus on organic growth through the provisioning of high-quality products and services. We have continually strived to operate with our management team in a single facility because we recognize the benefits that flow from centralized leadership. We are investing in a world-class expansion to our facility in order to accommodate our expanding R&D games and systems teams, manufacturing and service resources needed to support the continuing demand for
our products.

Konami’s success is directly linked with our dedication to quality products and services. We are known in the industry for the reliability of our games and systems products, and this reputation was earned over the course of 14 years during which we committed ourselves to innovation, quality math models and a focus on delivering games and systems products that deliver performance instead of the flashy, licensed theme games that have become common at tradeshows but often fail to perform on casino floors. Konami’s talented games and systems R&D teams repeatedly produce hit products, but demonstrate that they are never satisfied with momentary successes. We believe in this business model and as a result are focused on delivering innovative new products such as Neo Contra™ with Symphonik 3D Sound™, Titan 360™, our Rapid Revolver™ cabinet and our versatile SeleXion™ multi-game cabinet. On the systems side of the business, we continue to innovate by listening to our customers and delivering products that will allow them to compete more effectively for new and existing customers. On-demand and SYNKStart True-Time Tournaments™, SynKiosk™, Konetic Mobile Apps™ and Konami Enterprise Intelligence™ (KEI) are recent examples of innovative new systems products designed by Konami with our customers in mind.

While the entire industry is experiencing variations of the same macroeconomic forces, each operator and supplier has adopted different business strategies in pursuit of success. At Konami, we are in the business of helping our customers grow their businesses. We believe that our stability, commitment to the highest quality, innovative products and investment in growth will continue to differentiate Konami as a trusted, world-class supplier of gaming equipment.

Gavin Isaacs
President and CEO
Scientific Games Corporation

The consumer is driving convergence and consolidation of the industry in so many ways, with the modern player open to experiencing novel content on new and emerging channels. In 2015, the successful supplier will anticipate evolving consumer behavior with the development of platforms, tools and systems that are sophisticated and easy to use, and, above all, fun games that players love to play. We need to lead, not follow the consumer—the more entertaining the game, the better the system, the smarter the investment in research, the greater the potential for success for the supplier and the operator.

Over the past several years, standalone lottery and gaming companies had limited resources to fund the essential research and development (R&D) to get in front of rapidly changing consumer preferences. Companies that have made strategic acquisitions, like Scientific Games, are able to lever centers of excellence in content creation, VLT, social, instant tickets, systems and more, will be best prepared to successfully utilize all distribution channels and emerge as the partner of choice.

As we look to 2015, Scientific Games sees clear opportunities to establish itself as the global leader in the supply of gaming and lottery products. By leveraging the collective histories of Scientific Games, WMS, Bally Technologies and Shuffle Master, along with an unparalleled leadership team, we expect to help shape the future of the gaming and lottery industries.

Today, I believe that Scientific Games stands alone as the only gaming and lottery supplier with a diverse and comprehensive library of products and services that can best address customer needs. In 2015, we will offer customers a one-stop shop for gaming machines, gaming operations, interactive gaming, gaming systems, utility products, proprietary table games, electronic table systems, instant lottery products and lottery systems.

Our WMS product portfolio, Gamefield xD™ performance remains strong as we continue to roll out new content such as THE FLINTSTONES™ slot game. Our new Blade 3-reel mechanical cabinet has also gained significant early traction, thanks to its innovative design and player-favorite games in what had become a somewhat stale market.

Within our newly acquired Bally and Shuffle Master businesses, the development teams continue to deliver strong new products, including Bally’s Pro Wave 360° cabinet and configuration, which redefines community-style gaming, and Shuffle Master’s Safe-Bacc, a revolutionary new product that provides unparalleled security by combining best-in-class automatic shuffling and card-reading technology.

On the interactive front, we expect to build on the success of our Jackpot Party Social Casino, the growth of our Gold Fish Social Slots app, and our real-money gaming products.

In lottery, one of the exciting new products we are bringing to consumers is the PlayCentral™ HD, our newest self-service retail technology. It offers a compelling user experience—just touch the screen to buy instant lottery games or draw games like PowerBall® and Mega Millions®. In addition to a user experience that appeals to the digital generation, the machine just has a cool factor. Response from the industry has been phenomenal.

Underlying our product strength is the talent of our R&D teams. By combining these teams and our existing world-class capabilities, we expect to accelerate the pace at which we can respond to ever-evolving player preferences. In this regard, our team is helping customers understand how suppliers and operators can work together to offer an entertainment experience that attracts newcomers, keeps core players happy and provides financial gains for casinos. I believe this is crucial to our collective success and will foster an environment at Scientific Games that keeps these efforts out front. Our teams have always had the capacity and talent to support existing platforms, but now our new scale uniquely positions us to invest in new ideas for the future as well.

Scientific Games is extremely excited to get to work in 2015. We will leverage the collaborative efforts of our global team and continue to promote a common culture of innovation and continuous improvement; in doing so, we will both serve our customers better than we ever have while creating exciting new games and products, secure and reliable systems and a variety of services for the global marketplace.

Chuck Hickey
Vice President of Slot Operations
Barona Casino & Resort

After reading my predictions for 2014, I honestly think I should just copy them and send them in again. I think it was very good advice, short on the mechanics of doing it, but nevertheless, pretty good advice. It was about keeping an open mind and looking for opportunities from the challenges ahead in 2015. I’ve come to believe that predictions are pretty useless. The ability to adapt and take advantage of what lies ahead is a much better survival mechanism.

I’m lucky that I work for Barona Casino & Resort, where we have lots of staff. My predictions for 2015 are that we will spend a lot of time talking to staff, talking to guests and talking to each other, trying to figure out ways to make our staff more money. The fact (not theory) is that by helping make our staff more money, they will make the casino more money. It has worked well in the past, and I predict it will continue to work well in the future. The key points here should be:

Listen to your staff—they are the experts at what they do and know what the guests like. They are eager to please your guests and generally know that if they do they will make an extra buck. They have lots of ideas on how to accomplish this.

Listen to your guests—they also know what they want and just listening to them is more than they probably get next door. If you can fulfill their wishes, you will be well ahead of the competition. They also have lots of ideas—some like “Bigger Jackpots, More Often” aren’t all that helpful. But they also have plenty of observations on what they do and don’t like about your casino and your competitors.

Be prepared to be wrong and so be prepared to change directions, put the past behind you and learn to enjoy the challenges of tomorrow.

Buddy Frank
Vice President of Slot Operations
Pechanga Resort & Casino

The crash of industry giants, Caesars and IGT, dominated the news at year’s end. By the time you read this issue, IGT will have a fresh new start as a division of lottery giant GTECH, and Caesar’s will probably be announcing another idea to prevent bankruptcy.

Caesars: I have just finished What Stays in Vegas by Adam Tanner. Like two other books, it declares Gary Loveman as a genius. Indeed, his push toward more data-based decisions was brilliant. When he arrived from Harvard in the late ’90s, he found an industry that was governed by a set of rules that were only whispered from pit boss to pit boss. His marketing instinct to find out what was really happening was spot on. But he completely stopped listening to (or got rid of) those who didn’t assimilate (more on this later). And most controversial was the idea that you can take more from a slot player if you give it back in rewards. Despite my feelings that this was sacrilege, it worked. Our market research every year would reveal that players thought Harrah’s Entertainment (and later Caesars Entertainment) had loose slots. Total Rewards triumphed over tight slots. Until Caesars started taking too much and giving back too little. Bad timing of the company’s privatization was surely the key factor in this. But its slot machine pricing practices, combined with declining reinvestment in both players and slot equipment, didn’t help. As Abe should have said, “You can fool all the players some of the time and some of the players all the time.” Lesson 1: “If you tighten the slots, then you should give it all back to the players. Or don’t tighten your slots in the first place.”

IGT: While most are blaming CEO Patti Hart, I think many of IGT’s issues were brewing long before Hart arrived. There were nine folks in the sales organization chart between us at Pechanga and the CEO of IGT. Today there are five, and they could probably drop one of those without too much damage. At its peak, IGT was always priced higher, offered fewer incentives and was a lot more arrogant than the competition. Lesson 2: “Some ‘right-sizing’ can be good.”

But Hart also stopped listening to (or got rid of) almost all the insiders who didn’t join the parade. One of IGT’s many strengths was “branded” wide area progressives. Wall Street analysts, and those new to the industry, are easily distracted by bright lights and shiny objects. They, and Hart’s new team, loved every branded product they met. Never mind that “Judge Judy”, “CSI”, “Bridesmaids”, “Amazing Race”, “The Beverly Hillbillies”, “Twilight Zone”, and others have been abandoned by more fans in the last three years than Alex Rodriguez and Lance Armstrong combined. But oddly, you can find most of these titles still performing well in one unique market: the Las Vegas Strip. That is Lesson 3: “What happens in Vegas should stay in Vegas.”

Infrequent players like bright lights and shiny objects too. But great players like volatility, meaningful bonuses and liberal hold percentages (Vanna White’s dresses aren’t free). IGT designed far too many games on what worked on the Strip. Meanwhile, Aristocrat, Ainsworth, Bally, Multimedia and VGT designed for the rest of the world. Locals will always drop a few bucks to test a brand, but they’ll quickly return to old favorites.

Now to two examples to tie both these two companies together. Last year, Caesars bought 7,000-plus IGT video poker games in a single buy. Here’s the irony: Serious players love IGT video pokers; video poker players know their slots better than most. The odds on video poker machines are clear for the public to see. Therefore, the only new games at Caesars’ properties are ones that good players know are tighter than almost anywhere else. See Lessons 1 and 3 above. And finally Lesson 4: “Keeping a few contrarians on your staff may help prevent such basic mistakes in the first place.”

P.S. While reviewing this article, I realized that both Gary Loveman and Patti Hart each made more money last quarter than I have collected in my 30-plus years in this industry. Therefore; totally disregard everything above.

Peter Bertilsson
President & CEO
Metric Gaming

When living through them, gradual changes in any industry are inherently difficult to detect. Compare the present with a few years back, however, and those changes become glaring. Such is the case with the gambling sector, where online and mobile technology have made the sector progress faster than even the boldest predictions. But merely identifying change is of course elementary—it is the differentiation between types of change (namely the enduring trends versus the passing fads) that separates the followers from the leaders, and can spell the difference between failure and success.

Short of having a crystal ball, however, consistently distinguishing between the two is exceedingly difficult. For example, who could have foreseen the extraordinary, explosive growth of online poker (let alone its demise), or the massive success of playing slot machines online (let alone playing them for virtual currency)? But if we assume history is a reliable teacher, then we have perhaps learned that, at least in the gambling industry, offline popularity translates well into sustainable online success.

Sports betting appears to be on the same path. Its offline popularity is beyond dispute (organized bookmaking dates back to the 18th century), and the industry continues to enjoy tremendous growth, especially via online and mobile channels—indeed, mobile in-play betting is quickly becoming the biggest revenue driver for sportsbooks worldwide.

Even the largest, most well-established bookmakers in Europe are still seeing significant, year-over-year growth in sportsbook revenues, and Bet365—widely considered the leader in online and mobile in-play sportsbook offerings—has grown its mobile revenue over the past year by 103 percent.

I expect we will continue to see online and mobile sports wagering surge in 2015. Advances in mobile technology perfectly complement the sports betting experience, in which increased bandwidth and lightning-fast connectivity and transmission speeds have enabled truly instant gratification, in-play wagering. Thanks to this enhanced capacity on all mobile devices for real-time updates, visualization tools and live streaming video, bettors can now wager entirely at their own pace and convenience.

Further solidifying the future of sports wagering is the current revolution of the global television market, where commercial-free, on-demand TV (e.g. Netflix) has forced the networks to put more marketing emphasis than ever on live broadcasts, namely sports. As a result, the cost of live sports media rights will continue to skyrocket, forcing networks to seek auxiliary revenue sources in addition to conventional commercial advertising. Mobile, “second-screen” sports betting is poised to play an enormous role in providing that supplemental income—a phenomenon that is already well underway in Europe and, in light of the proliferation of fantasy sports throughout mainstream America, ready to take hold in the United States.

Hardly a passing fad, all signs point to continued and impressive growth in the mobile sports betting industry.

Greg Gronau
President and CEO
Gaming Partners International Corp. (GPI)

The headlines that seemed to dominate 2014 were news stories of mergers and acquisitions all across the industry by companies that sought to expand and/or fortify their product portfolios and strengthen their standings in the market. With the slowed pace of gaming expansion in the Americas and Europe’s growth at a standstill, it would be no surprise to see the trend continue well into 2015. At Gaming Partners International, we finalized our own acquisition of GemGroup in July. The strategic move increased our domestic market share and expanded our manufacturing capabilities to better serve our customers as well as add the well-known Gemaco branded playing cards and layouts to our domestic product portfolio. These added capabilities also contributed to furthering GPI’s reach into the Asia Pacific market where we can now offer customers in the region layouts, cards and dice along with our growing currency suite.

While growth in the U.S. gaming market has been sluggish, the announcement by Resorts World to build in Las Vegas signals confidence in gaming’s viability and its ability to endure through sometimes uncertain economic times. In addition, Massachusetts has approved the state’s first gaming license, granting Wynn Resorts the approval to build the state’s first-ever casino resort. Growth in the Asia Pacific region continues at a steady pace. Some of the industry’s largest gaming operators have plans to expand their presence into countries such as Korea, Vietnam and Australia, only further solidifying the region’s dominance. At the moment, there are at least 12 new casino resorts planned for the region over the next five years.

Each year, gaming expansion challenges suppliers and manufacturers to bring new offerings to customers as they seek new products that will help them stand out from their competition while also providing operational benefit and value. This is a challenge GPI gladly rises to meet as developing new and innovative products for our expanding global customer base is one of our priorities. We introduced a number of new products to meet strict casino requirements while also providing solutions to help customers streamline their operations. These needs include new currency options and currency security features that help operators protect their most valuable asset, their money.

Understanding the importance of currency security, we continue to develop new offerings including a completely new currency chip line, our injection molded B&G V-Series chips. We’ve also added two new standard plaque design options, our Dragon’s Eye and Ribbon design as well new plaque materials, including new color-shifting, Chameleon lunettes. New currency security options have been added to our already extensive security feature offerings, SecuriFilm, 3-in-1 UV, and LaserTrack in the gold lace of our European currency as well as in the inserts of our J3 jetons. RFID is still playing a role in how we develop new solutions to help streamline both operations at the back of the house and at the table. Add to this the addition of the Gemaco brand cards and layouts and cards to our product offerings, we are looking forward to the opportunities that 2015 can bring.

Our customers are important to us, and it is their feedback and input that help guide our research and development. As we enter 2015, we look forward to growing and developing our relationships with our customers and strategic partners to continue to provide high quality products and solutions to maximize table game play and provide operational savings for the casino.

Todd Cravens
CEO for The Americas

Over the next year, we at TCSJOHNHUXLEY are very bullish on the Americas market. Overall, the fundamentals for the table game business are getting stronger every day. We are excited to see operators investing in their offerings in several markets, and believe this will continue into 2015 and beyond. The opening of potential new markets for table games also makes this a great time to be in the green felt business.

In 2014, we have seen a large investment in table games from operators in core markets. Players in Las Vegas and Atlantic City (yes, Atlantic City) invest in new wheels, displays and chippers as they freshen their floors. We believe that the nice uptick in table games versus what operators are seeing on the slot side has pushed this investment. We see this investment continuing in 2015, as other operators follow suit.

U.S. regional markets have continued to work very hard to tread water in recent years. Again, one of the green shoots has been table games that have been slightly up or flat in most of the regional areas. While the outward spending of hardware is not as strong as the core markets, customers are seeking ways to goose earnings and find efficiencies through software.

As a table games company, we always keep our eye on new market openings. The two major markets that can have a big impact in 2015 will be Florida and Mexico. We know there is great demand in the Sunshine State for certain currently prohibited table games, and if a new agreement is reached with the state, Florida will be a lot of fun in 2015.

As of this writing, the new Mexican gaming law has passed the lower house of Congress. If the bill passes the Senate and gets a signature from the Mexican president, this will again be a great market for table games. We love the fact that this law has real teeth, and that regulation and background checks are core principles.

I don’t think that I have looked forward to an upcoming year more than I do for 2015. Over the last two years, TCSJOHNHUXLEY has undertaken many initiatives for future growth. 2015 is the year all that hard work comes to fruition.

Essentially, it’s about delivering on three prime areas to our customers: product, solutions and customer service.

Product: TCSJOHNHUXLEY has undertaken huge efforts over the last several years to grow our technical capability and this will continue, but we also focus on developing our core products that have created the brand our customers have grown to respect and rely on. Our world-class wheels, chippers, winning number displays and furniture continue to set industry benchmarks, and we intend to keep them there by providing even better functionality and reliability through technical upgrades and developments.

Solutions: Building great product has been the standard for the company since inception. Adding solutions to our portfolio is a new proposition, but one that is set to significantly change the table game space. The introduction of the Gaming Floor Live platform makes it possible to deliver genuine dynamic management of table game operations for the very first time. An open platform that integrates with all hardware on a table and software on the backend, Gaming Floor Live pulls data from live gaming tables and delivers it to customers in real time. This allows an operator to make decisions based on live data, which may include raising a table limit, speaking to a dealer to deal a bit faster or deciding to open an additional table. I believe that Gaming Floor Live will allow every operator to sleep a bit better at night.

Customer Service: In a time of mega companies and streamlining of organizations, TCSJOHNHUXLEY will focus more time and effort on customer service. Our aim is to be the best at supplying live table gaming solutions. That means being responsive. There is no “standard” order from any of our customers. We must be able to work with, react to and plan the future with our customers. Flexibility is key, and TCSJOHNHUXLEY is well-positioned to fulfill this criteria.

So for 2015 the plan is simple: continue to deliver our great core products, roll out innovative solutions globally and continue to invest and build on customer partnerships. I feel truly lucky to be in my position and work with a great team in the Americas and throughout the world. I cannot wait to get on the road and see customers in 2015. It’s going to be a great year!

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