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Best of Howard Stutz

Gaming Guru

Howard Stutz

Michael Jackson comes to the rescue of slot makers

31 July 2012

We've heard this one before.

The slot machine industry has been anticipating a comeback since the recession depressed new-game sales. Casino operators shunned new and more expensive technology and remained loyal to older machines in order to avoid spending money on updating gambling equipment.

That attitude is changing, according to a survey by Fantini Research and Roth Capital Partners.

Through new casino openings this year -- primarily in Ohio -- slot machine sales and game leases have increased. Meanwhile, existing casinos appear more willing to invest in replacing older slot machines.

At least one new game title -- the Michael Jackson-themed slot machine produced by Bally Technologies, Inc. -- seems to have the industry buzzing.

The Roth-Fantini survey is designed to track slot machine and related technology purchasing trends on a quarterly basis. It is the gaming industry's largest slot survey of total casinos and slot machines.

The newest report surveyed 68 purchasing agents (61 from North America and seven from international markets) at commercial, racinos and Indian casinos that operate 222 gaming venues with roughly 255,000 slot machines. The North American participants represented roughly one-quarter of the slot machine market in the U.S. and Canada.

The survey's results were good news for the leading slot machine manufacturers.

Survey participants said they bought 37 percent of their slot machines in the second quarter from International Game Technology. Games produced by Bally Technologies accounted for 19 percent of all sales. WMS Industries was the third-largest American slot machine manufacturer, accounting for 17 percent of all sales.

The game that is fueling the largest response from casino patrons is the Michael Jackson-themed slot machine that Bally unveiled at last year's Global Gaming Expo. The machine features high-tech game functions, an elaborate sound system, and displays music video performances of the late singer during bonus rounds. In one jurisdiction, the game has met high marks, said one analyst.

During a recent trip to the South Florida casino market, Janney Montgomery Scott gaming analyst Brian McGill said the game dominated the action at properties owned by the Seminole Indian Tribe. Three of the properties, including the Hard Rock near Fort Lauderdale and the Coconut Creek Casino, had 20 of the Michael Jackson slot machines.

"The South Florida market gets many new slots on the floor early, partly due to the fact that the Seminoles keep a fairly fresh floor at their properties," McGill said. "At the Hard Rock, we heard win-per-day rates that are estimated in the $700 to $800 range."

McGill said the Michael Jackson games have a chance to supplant another Bally's game based on the movie "Grease," which rolled out in many markets in June. While the Michael Jackson games that went into the Seminole properties arrived in June, most markets won't see the game until the September quarter.

In Las Vegas, the Michael Jackson slot machine is available at many casinos, including many of the Strip area's 20 properties operated by the two largest gaming companies, MGM Resorts International and Caesars Entertainment Corp.

According to the Roth-Fantini survey, North American casino managers intend to replace 8.6 percent of their slot machines this year, up from 7 percent in the first quarter. The figure is higher than the past several years, when lower-than-expected replacement sales dragged down slot machine manufacturer profits.

Smaller slot machine companies are also benefiting, according to the survey. Konami Gaming, a subsidiary of Japanese consumer electronics giant Konami Corp., accounted for 8 percent of the sales, while smaller companies, including Multimedia Games and Australia's Ainsworth, are beginning to get noticed.

Existing casino operators are in a quandary.

The newly opened Horseshoe Casino Cleveland and the Hollywood Toledo have the latest available slot machines. Older casino operators don't want to risk alienating customers seeking to play those games.

As such, 29 percent of the operators surveyed will add casino marketing technology, including picture-in-picture on the games that advertise a casino's shows or restaurants. Some 13 percent of the managers want to add targeting coupon technology, which allows customers to print off promotional coupons at the machine for special offers, such as two-for-one dinners.