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Best of Howard Stutz

Gaming Guru

Howard Stutz

Smaller, midsize companies poised for seat at the table

12 October 2015

As the gaming equipment manufacturing sector coalesced in the last two years through almost $17 billion in mergers, Joc Pececnik quietly watched with keen interest and personal insight.

In 2006, Pececnik sold 50% of his Slovenia-based Interblock Gaming, a developer of multi-player electronic table games, to Australian slot machine manufacturer Aristocrat Technologies.

Within four years, the deal unraveled.

"Our marriage was not a perfect one," Pececnik recalled during an interview at the Global Gaming Expo. Aristocrat knew slot machines but didn't understand electronic gaming tables.

Pececnik, chairman and founder of Interblock, re-acquired the other half of the company in 2010 and spent the next five years reassembling the business.

Now, as the reconfigured Scientific Games Corp. and International Game Technology have become the gambling equipment's industry's two giants, smaller and mid-sized companies like Interblock are ready to take a seat at the table.

At G2E, the company made a loud splash, displaying its electronic versions of blackjack, craps, roulette, and baccarat, as well as the Pulse Arena, an interactive environment that mixes music and entertainment while connecting Interblock table games.

Leading up to G2E, the company announced two significant transactions. On Sept. 23, Interblock was contracted to install 170 of its electronic table games and a French-Canadian version of the Pulse Arena inside the four Casinos du Quebec properties in Canada.

A day later, Interblock announced an expansion of its agreement with New York to add electronic blackjack tables comprising 228 seats to the state's racetrack casinos. The deal gives the company more than 1,000 electronic gaming seats in New York, including roulette and baccarat. Interblock has 800 table game seats between Resorts World Casino New York City and the Empire City at Yonkers Raceway.

"There are some big sharks in play," Pececnik said. "But there are still a lot of small fish to capture."

The key for Interblock is that many North American and European gaming jurisdictions, which don't allow live table games, define dealer-less electronic gaming tables as a slot machine.

Interblock CEO John Connelly said millennial customers — the 21-to-35 age demographic that drew much of the industry discussion at G2E — like to play table games.

"The data we've seen seen is that 90% of the millennial customers play table games when they gamble," Connelly said. "Electronic tables are a great learning tool."

Connelly, who has more than 20 years experience with Bally Technologies, Automated Wagering International, and GTECH, joined Interblock in January as Pececnik began to increase the focus on North America and the U.S. The company's games are absent in some 80% of the U.S. casino market.

"The U.S. is a big opportunity for us," Pececnik said.

Connelly said Interblock is in growth mode at its Las Vegas-based North American headquarters. When he joined, there were 18 people in the office. By the end of the year, there will be close to 50 new sales and marketing employees. Former WMS Industries executive Rob Bone was named president of the North America operations this year.

Interblock is projecting double-digit revenue growth this year and in 2016.

"2015 was the foundation building year for Interblock," Connelly said. "We've implemented a lot of processes and procedures and we're opening offices internationally. There are so many opportunities for Interblock that we really need to prioritize those areas."

Pececnik is an entrepreneur who founded Interblock 25 years ago. In his native Slovenia, he created a charitable foundation to help socially endangered families. He has also revived Slovenian soccer, taking over a professional team that is now known as FC Interblock. Pececnik also worked with the city of Ljubljana and the Slovenia Olympic Committee to build a state-of-the-art stadium.

Interblock was licensed in Nevada in 2008 when it was half-owned by Aristocrat. After buying back the other half of the business, the company made its first U.S. table game placement in 2010 at California's Pala Casino in northern San Diego County. Interblock has games in Las Vegas, but is focused on expanding into other international markets, including, Australia, New Zealand and South America.

"The changes in the industry have created a lot of opportunity for us," Pececnik said. "The other companies are spending two to three years on integration. We've put together the best management, we have new capital and new products, and now we are on the road."

Two years ago, Interblock made a minisplash at G2E by bringing in Los Angeles Kings center Anze Kopitar, who led his team to the National Hockey League's Stanley Cup Championship a year earlier, to sign autographs and pose for photos in the company's booth. Kopitar, a Slovenia native, was helping out Pececnik.

Now, the company's games are the draw.
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