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From underscoring its commitment to responsible gaming to advancing efforts to streamline international growth and opportunity to creating innovative ideas to reinvigorate slot products and woo a new generation of players, 2014 has been a year of global strength and accomplishment for the Association of Gaming Equipment Manufacturers (AGEM).
“There’s no question that this has been the most active year in AGEM’s history in terms of the issues that AGEM has addressed,” AGEM Executive Director Marcus Prater said. “It was a very good year, and we’re very pleased about that.”
Gaming manufacturers and suppliers continue to find value in the organization, which has grown by leaps and bounds during its 14-year existence.
“As we head into G2E, our membership is at an all-time high,” Prater said.
From its humble beginnings with four members in 2000, AGEM has seen its membership grow to 144 members from more than 20 countries. They represent a broad cross-section of the gaming industry, including manufacturers and suppliers of electronic gaming devices, systems, table games, online technology, key components and support products and services for the gaming industry. The nonprofit international trade group’s mission is to further the interests of gaming equipment suppliers throughout the world through regulatory influence, trade show partnerships, educational endeavors and corporate citizenship.
“Our influence has been growing at a nice steady rate for years,” Prater said. “And this past year there just happened to be a lot of stuff going on where we needed to get involved, and I think it’s a good thing for our industry.”
This year, AGEM hit the ground running in January by bringing Connie Jones on board as its first director of responsible gaming. “I think the appointment of Connie Jones as our director of responsible gaming was a watershed moment for our organization,” said AGEM President Thomas Jingoli, who is chief compliance officer and senior vice president for Konami Gaming. “We spend a significant amount of our revenue every year on matters related to the area of problem gambling, and so it’s been really good to have her on board.”
AGEM already had demonstrated its strong support for responsible gaming efforts, but hiring such a highly respected responsible gaming representative underscored the organization’s commitment, Prater said.
In her first year, Jones has taken strong strides to demonstrate just how important responsible gaming education and awareness is to the organization.
Asked what kind of a statement AGEM made by bringing her on staff, Jones said, “I think it says to the gaming world and the public that AGEM is serious about responsible gaming and is doing more than just talking about the issue.”
Just a couple of months ago, Jones gave a presentation outlining responsible gaming technologies and their effectiveness at the National Conference on Problem Gambling. “It was rewarding to bring the latest developments in responsible gaming technology on behalf of AGEM.”
Jones’ accomplishments include drafting the AGEM Responsible Gaming Code, which defines responsible gaming as it relates to gaming equipment manufacturers and suppliers. Under the code, AGEM will establish a responsible gaming committee to help broaden AGEM’s commitment to responsible gaming and enhance understanding of the role of technology providers as advocates of responsible gaming. Goals under the code include engaging with the problem gambling community by participating in their conferences and events; working with public policy makers in the creation of responsible gaming programs and initiatives; establishing responsible gaming guidelines for advertising and promotion of gaming products; providing financial support for problem gambling/responsible gaming organizations and events; and for encouraging support of problem gambling research and treatment.
Jones said she is looking forward to continuing to expand the AGEM footprint globally as an advocate of responsible gaming and to implement the new AGEM Responsible Gaming Code. “We will also continue to engage policy makers in their ongoing efforts to reduce problem gambling through technology,” she said.
Jones also noted that the recent announcements of mergers of IGT and GTECH and Bally Technologies and Scientific Games will present new opportunities to consolidate responsible gaming efforts and technologies. “We are undoubtedly on the brink of a new era in the gaming, and AGEM will continue to provide leadership and guidance in responsible gaming.”
International Influence
AGEM officials also have noted that the perception of AGEM as an American organization is changing. “I think we have made great progress. The reality is we have in the last year been extremely active in different global efforts,” Prater said, citing as examples efforts to help address regulatory issues in Austria and Chile and to coalesce supplier voices in Mexico.
“Our membership has grown to a record 144 companies this year with many members now based outside of the United States or with sizeable operations in Europe,” AGEM Director of Europe Tracy Cohen said. “This, coupled with the strong presence we have at trade shows and in the press, has helped to spread the message that our mission is global regardless of location. The ‘A’ in AGEM is no longer considered to stand for American.”
Cohen said the association has spent the last 12 months working closer with the European Casino Association (ECA) on initiatives to tackle a number of issues that affect AGEM members in the region. “This is no easy task as Europe is heavily fragmented not just in terms of number of countries, but within the different regulations in those countries,” she said, noting that the association has started to focus on issues that are easier to tackle on a pan-European basis, issues such as responsible gaming.
AGEM also hosted exhibitor meetings at ICE, “which provided a forum for the industry to discuss some of the issues we face exhibiting at trade shows around the world,” Cohen said. “As with other AGEM’s initiatives, there are major benefits to members by sharing information and knowledge. There’s also strength in numbers and a power behind having one voice.”
One of the cornerstones of AGEM’s efforts has been to work with regulators in different jurisdictions around the world on regulatory reform, such as reworking regulations that place unintended burdens on suppliers.
Over the past year, the organization has received multiple requests for help addressing regulatory issues, Jingoli said. “From a global AGEM perspective that’s been kind of cool to see how some of these markets have reached out to Marcus or myself to ask us questions about our organization and about what we can do to help them with some of their regulatory matters that have come up,” he said.
Regulatory reform is a major thrust of the organization, Jingoli said. “That’s really a big part of what we do,” he said.
Prater noted that AGEM’s global reach has been especially strong over the past 12 months. For example, when an issue came up in which new proposed slot regulations included technology and protocol measures that would have been too onerous for manufacturers, AGEM was among the organizations contacted to help prevent the implementation of the new security requirements. AGEM and others responded with letters to the Austrian government and the European Commission, and “the end result was that we hope the Austrian government will delay implementation for further review,” Prater said.
In Chile, a new government regulation was proposed to do away with ‘the malfunction voids all pays and plays’ disclaimer, a very important protection for manufacturers. AGEM hired a local law firm in Santiago to meet with regulators and that provision has been placed on hold for further review as well. Earlier this summer, AGEM formed a new Mexico Committee that is based in Mexico City to represent interests of AGEM companies, including several Mexico-based companies. Mexico shows much promise for gaming, as a new federal bill is expected as early as this month, and as SEGOB, the federal agency that oversees gaming, has shown a commitment to eliminating corruption in gaming and a willingness to communicate with legitimate suppliers and listen to manufacturers’ concerns.
The AGEM Mexico Committee was formed to present a unified voice for professional, licensed gaming companies to SEGOB. Prater and AGEM’s new Mexico Committee chairman Carlos Carrion of Aristocrat met with the SEGOB official overseeing gaming and her staff. “It became very clear that she appreciated working with a professional organization with a commitment to responsible gaming education and regulatory oversight and all the things you need in a regulated market,” Prater said. “She’s very clear that she’s not putting up with any corruption from anybody but at the same time she knows that to advance the industry she needs to communicate and work with the people that are involved in the industry already.”
The bill, which would update the country’s 1947 gaming law, shows much more promise for passage than in the past because it’s driven by the government, rather than an individual politician. “We could see a draft of the bill as early as September,” he said.
Gaming in Mexico has stagnated, but there is much opportunity, Prater said. “We’ve only seen about a 50 percent penetration. If it’s a 75,000-machine market, there’s enough licenses and permits to double that, but the market will only double if there’s a framework and business environment where people feel comfortable doing that. We need this next wave of expansion to take place and that will only happen if we get the federal bill that we need.”
In addition, AGEM showed its support for the Canadian Gaming Summit in Vancouver with a sponsorship. Prater also attended the Japan Gaming Congress, and AGEM sponsors the G2E Asia.
AGEM also is making an effort to work more closely with the American Gaming Association. “Geoff Freeman’s been on board about a year now, and we’ve been quite aggressive in reaching out to him,” Prater said, noting that AGEM is supportive of the AGA’s proactive efforts to present an accurate image of the gaming industry, Americans’ perceptions of the industry and its positive impacts on economic development and employment.
Challenges and Opportunities
Perhaps one of AGEM’s most important achievements this year came in the form of an innovative concept to change Nevada gaming regulations to permit a variable payback percentage that would allow for the kinds of skill-based gaming that may draw younger players who have shown little interest in playing traditional mechanical or video gaming machines.
“As manufacturers collectively we all get asked about how do we get the younger generation to play slot machines, and what are we doing to address that,” Jingoli said. This shows promise in the ability to make slot machines more attractive to the younger, Xbox generation. “We’re expecting big things to come out of that.”
AGEM’s variable payback percentage proposal got a positive reception from the state’s Committee to Conduct an Interim Study Concerning the Impact of Technology Upon Gaming, which was initially promoted by Gov. Brian Sandoval. AGEM’s proposal will be presented to the state Legislature next year.
If the concept is approved and implemented, Nevada would become the only state to allow a gaming machine in which a player has the potential to control the payback of a slot machine.
“This whole variable payback percentage opens the door to games with all sorts of different features, skill-based and otherwise,” Prater said.
It’s important for the gaming industry to find new ways to engage with players, Prater said. “Slot revenues across the country have been flat to declining,” for a variety of reasons, he said. Among them, an aging demographic of core players, higher hold percentages on games and the younger players’ current disdain for the games. “They’re not even glancing at them [slots],” Prater said of the younger players.
Once Sandoval’s committee was created, AGEM asked its members for ideas on what they would like to see changed, if they could change anything they wanted.
The variable payback proposal was one of about 25 concepts floated by members. It proved to be the most popular among members, and the one with the most promise.
Eventually, Prater said, variable payback could be a game changer for the slot industry. “It changes the face of our business moving forward. I think this is exactly why this committee was formed,” he said.
“It gives game developers a whole new toolkit to do some crazy stuff,” Prater added. “I think that over time it will alter the slot floor for the good of all. It will create more games, more excitement, more revenue and more play.”
He acknowledged the change may not happen overnight because a skill-based variable payback game initially will be a niche game. “But over time younger players, I believe, won’t play anything but that,” Prater said.
The way it would work is the base slot game would guarantee an 88 percent payback, but if a player is adept at shooting down missiles or whatever the bonus feature is, that player can change the payback to an even greater percentage of perhaps 95 percent.
“It becomes a challenge to them,” Prater said. It also creates the possibility of offering a bank of machines where players can compete against each other. “Think about a bank of machines where you’re all shooting down missiles and whoever’s the best at it gets the most money. The younger gamers who have a different idea about these things, they now have a reason to play.”
The game also will give operators the ability to configure that percentage the way they want, he said.
“Furthermore, you can now reward your better players. The better players are [often] immune to buffet comps and even promotional credits, and they would rather than have a higher payback percentage than a buffet comp, and you could do that,” if variable payback percentage is approved, Prater said. “You’re going to have to do your marketing algorithms and you’re going to have to be very good at how you manage it, but we’re giving the operators new tools, new toys to play with that they’ve never had.”
AGEM already has made a presentation to Caesars Entertainment to explain the proposed regulation change and plans to make other presentations as well, Prater said. “We’re going to go on sort of a goodwill tour and explain what the reason was behind this push, and how it can benefit the operator,” he said.
Prater cited newly Nevada-licensed Gamblit Gaming’s proposal to offer games with skill-based elements, such as one called Lucky Words, similar to Words with Friends or Scrabble.
As such game types win regulatory approval, the casino landscape will begin to change, Prater predicts. “You’re going to be able to walk up to something that has joysticks and steering wheels, and they’re going to look different. And I think that this Gamblit stuff that I saw based on the screen shots in their proposal, I’m pretty certain it won’t look like a traditional slot machine.”
And while the slot floor landscape may alter in the future, the gaming manufacturer landscape is already changing as the industry has witnessed a wave of consolidation never seen before. Just as the industry was wrapping its collective head around the mergers of Bally Technologies and Shuffle Master, and Scientific Games and WMS, a new wave swept through, as GTECH moved to acquire IGT, Scientific Games announced plans to buy Bally Technologies, and Aristocrat Technologies announced a deal to purchase Video Gaming Technologies, among others.
Consolidation doesn’t significantly impact AGEM, Prater said. “If anything it creates a more unified voice,” he said.
However, it does mean a change in the AGEM board makeup, Jingoli said. “Due to some of the consolidations that have gone on, some of our traditional officers who have been on the board are no longer there so we’ve added new officers,” he said.
Jingoli said the organization created a new second vice president position on the board, with Mick Roemer, Multimedia Games senior vice president of sales, taking that inaugural position. “That’s been really good for us too. I like the dynamic of our board right now,” he said.
Consolidation in the supplier market will bring its own challenges, Cohen said. “Benefits will include cost synergies, uniting slot and lottery business to leverage slot content across the lotteries and online but there are sure to be casualties in the combined workforces due to duplication,” she said.
Cohen noted that the economic climate continues to be a challenge in many regions, although there are certain sectors such as online gaming that are still experiencing growth. “That being said, in Europe there are current issues surrounding the U.K. government’s plans for a 15 percent tax on online bets expected to come into force later this year which are certain to challenge the sector,” she said.
Nevertheless, Cohen said she believes there is “definitely more optimism and a positive attitude collectively displayed by the supplier segment of the gaming industry, and the next 12 months are sure to be exciting.”
AGEM is tackling more important issues than at any time in its history, Prater and Cohen said, and the plan is to build on this momentum in the coming year and work together to improve the business environment. Manufacturers are often an afterthought in regulation as jurisdictions focus on operators and then think about how the rules will impact manufacturers.
“AGEM’s goal is to provide the perfect platform for our members’ voices to be heard,” she said.
To learn more about the association’s work and become a member, visit www.agem.org. Read on to learn more about AGEM’s current members.