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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Century Gaming wary of proposed new Nevada slot machine tax

9 March 2015

LAS VEGAS -- Nevada slot machine route operator Century Gaming, Inc. doesn’t own the bars, taverns, restaurants or convenience stores where it manages more than 3,000 games.

That might seem a bit unusual for the state’s second-largest slot route company.

Most of Century’s main rivals provide slot machines to their own businesses, as well as distributing games and systems to the competition.

“We’re probably the last traditional slot route model,” said Century Gaming CEO Steve Arntzen. “We don’t compete with our customers in any fashion.”

That commitment to tradition also has consequences. Century’s revenue stream is tied solely to gaming.

“We don’t have food or beverage revenue,” Arntzen said. “We strictly depend on participation from gaming machines and systems or product fees.”

That’s one reason Arntzen is watching events unfold in the state Legislature.

Gov. Brian Sandoval’s $1.1 billion tax package to fund education and other services includes a new slot machine tax on restricted gaming license holders with more than 500 machines or revenue of $10 million or more. The governor hopes to raise $39 million through the tax.

Century could be facing a hit to its bottom line.

“I think the definition of slot route operator got a heck of a lot broader over the past 15 years,” Arntzen said.

Golden Gaming, Inc., the state’s largest route operator with more than 7,600 slot machines, is also Nevada’s biggest tavern owner, with 48 locations under five brands. JETT Gaming, which is owned by the Herbst family, manages the slot machines for the Terrible Herbst convenience store chain. Nevada Restaurant Services, Inc. owns the Dotty’s tavern franchise and serves as the route operator for the company’s nearly 100 locations.

“It used to be that you put the equipment in a location and split up the revenue according to a formula,” Arntzen said. “It’s still pretty much done that way, but it seems to be getting bigger for the other side and smaller for us.”

The tax plan could slice into the slot machine revenue Century receives after dividing up the results with bar and tavern owners. Slot route operators now pay a flat fee per slot machine.

Arntzen hopes the idea is thoroughly vetted by state lawmakers.

“I’m not sure if we should all fall into the same circle,” Arntzen said.

Meanwhile, Century, which also operates almost 4,000 slot machines in Montana, continues to look for ways to grow its Nevada business, which comprises more than 400 locations.

Century is unveiling several dozen new products for its customers in a private showing at The Orleans today.

Among the items for use on the company’s PowerVision system are new bar-top slot machines featuring game titles supplied by Aristocrat Technologies.

Other products include new video poker and keno games, system enhancements and new applications for Gamblers Bonus, the company’s player loyalty program for bar and tavern customers.

Century, when it was known as United Coin Machine, held a similar show at The Orleans three years ago when it launched PowerVision, the company’s slot machine game cabinet and system designed for the slot route market.

At the time, slot route industry had been hit hard during the recession, which slowed construction of new taverns and hastened the closing of older businesses.

In recent weeks, casino giants Station Casinos and Boyd Gaming Corp. told the investment community the Las Vegas locals gaming market is staging a comeback.

Arntzen, whose privately held Montana-based Century Gaming acquired United Coin in 2004, agreed with that assessment.

“We’re forecasting a 25 percent growth this year over 2014,” Arntzen said. “So far, we’re slightly above our forecasts.”

The biggest question facing Century is how it can continue to grow in Nevada. Arntzen said the company debates focusing on increasing gaming revenue versus adding more locations.

“The difficult thing is we’re all fighting over a limited number of bars,” Arntzen said.

In January, Century returned to Northern Nevada through a deal with Bully’s Sports Bar & Grill. Century’s Gamblers Bonus player rewards system will be provided to the tavern operator’s 11 Bully’s and Smokin’ locations.

Century sold its route operations in Northern Nevada to another operator in 2013, which flipped the locations to Golden Gaming last year.