Quicktakes - The month's trends in a glance - December 2003

The New Year's Eve celebrations were under heavy security across the country--helicopters and roof top snipers. There was an incident of New Year's violence, but it was in a café in Iraq, Iraqis attacking Iraqis. The celebrations around the country were large, successful and safe; Las Vegas, Reno and most other gaming jurisdictions were fully booked. The year ended with great results from the stock market; the two major lotteries both hit, one for $160 million and the other for $220 million. Things look better at the beginning of 2004 than anytime since 1999. The national economy and the gaming industry still face significant challenges, but the outlook is brighter.

The Federal Reserve, seeking to keep the economic recovery rolling along, held a main short-term interest rate at a 45-year low…rate unchanged at 1 percent. Jeannine Aversa, Associated Press, Yahoo Business, 12-9-03

U.S. consumer prices took a surprise tumble last month, dragging the underlying inflation rate to a nearly 38-year low, even as industrial output and groundbreaking for homes surged, reports showed on Tuesday. …The slew of data suggested the economy was stronger than most analysts had thought. Tim Ahmann, Reuters, 12-16-03

The U.S. economy grew at its fastest rate in nearly 20 years in the third quarter, boosted by robust consumer spending that carried into the closing months of the year…gross domestic product advanced at an 8.2 percent annual rate in the three months from July through September. Glenn Somerville, Reuters, Yahoo Business, 12-23-03

The robust and improving economy is being forecasted into 2004. The changes are already beginning to impact gaming. Last year's constant and insistent pressure to expand gaming and to increase gaming taxes may lessen as the need to raise additional revenue decreases in many states. Pennsylvania, for example, passed a budget without including slot revenue, once thought to be a critical component. The proponents in Pennsylvania still maintain slots are coming, but certainly without the same urgency to get it done as salvation for the budget that existed a couple of months ago.

The apparent economic recovery now under way may be lining some U.S. consumers' pockets with extra cash, but it's also slowing the spread of gaming around the country. …Frank Fahrenkopf and the Rev. Tom Grey, a top gambling opponent and executive director of the National Coalition Against Legalized Gambling, agree: State budget deficits are receding, and with them, so is the tide to expand gaming to raise government revenues. Rod Smith, Gaming Wire, Las Vegas Review-Journal, 12-6-03

State lawmakers [Pennsylvania] wrangled and negotiated over a final budget for months. When the dust settled in time for the holiday recess, legislation legalizing slot machines was conspicuously absent from a final spending plan. Edward Sieger, Easton Express-Times, 12-28-03

There was still one more chance to expand gaming in 2003. On December 30th voters in two communities in Maine voted. The last election of the year, the last time to vote for slot machines in your backyard. The voters rejected racinos. The likelihood of referendums expanding gaming seems to diminish with each failure. I can hear Tom Grey cheering from here.

Westbrook and Saco residents soundly rejected referendums Tuesday that would have allowed Scarborough Downs to build a harness racing track with slot machines in their cities. …The elections marked the end of a bitter two-month campaign and leaves officials with Scarborough Downs and its business partner, Penn National Gaming, planning their next move. Clarke Canfield, Portland Herald, 12-30-03

From this day forth I hereby declare you to be a financial institution. Casinos are once again being redefined, this time by federal legislation. Casinos are financial institutions by federal definition, not just for drug laundering but also now to track terrorists. The president signed legislation making it easier for the FBI to get financial data from casinos and others. In the 1980s the gaming industry became a target of federal investigators looking for laundered drug-money. It is therefore logical to expect the feds to be going after the industry while looking for terrorist money-launderers. Not good news for the industry. It will be mean more reports, more tracking and a decreasing ability to protect a casino customer's privacy.

President Bush signed legislation making it easier for FBI agents investigating terrorism to demand financial records from casinos, car dealerships and other businesses. The changes were included in a bill authorizing 2004 intelligence programs. …Under current law, "national security letters" can be issued to traditional financial institutions…to require them to turn over information. The bill expands the definition of financial institution to include other businesses that deal with large amounts of cash. Associated Press, Biloxi Sun-Herald, 12-15-03

2004 promises to bring a really major change in the way addictive gaming behavior is viewed. In December the industry gathered in Las Vegas to discuss the problems with several significant developments coming from that meeting. The American Gaming Association announced a code of conduct for the industry, the National Center for Responsible Gaming promises to do more, much more, and Park Place Entertainment, now called Caesars, said it would use a company-wide ban to keep self-declared and company-identified problem gamblers from playing in any of the company's properties. Nevada regulators also got into the act by reviewing some of the technical aids to limit the amount of money or time any player spends playing slot machines. Nevada has not passed any new regulations, but it is a huge step for Nevada to be discussing the same issues that have become so controversial in Australia and New Zealand.

The American Gaming Association on Tuesday announced a first-ever industry wide code of conduct for responsible gaming that will commit members to a broad set of problem gambling policies. In announcing the program, association Chairman Phil Satre said the new code takes in existing policies at many major casino companies…and, "I think," Harrah's Entertainment, of which he is also chairman. "(But) for many (smaller casino operators), this is a huge leap. This is the first time for many companies," he said. Rod Smith, Gaming Wire, Las Vegas Review-Journal, 12-10-03

Since its founding in 1996, the National Center for Responsible Gaming has raised more than $10 million for research on gambling addiction…hasn't yet established a working relationship with the regulators and policymakers…Over the next year, the NCRG hopes to boost its profile among state lawmakers by establishing a set of "best practices" for establishing regulations covering gambling addiction. It also aims to become more aggressive about networking with legislators and other state officials, NCRG Chairman Dennis Eckart said. Liz Benston, Las Vegas Sun, 12-9-03

The world's largest casino company is creating a list of problem gamblers who would be barred for life from all Park Place Entertainment casinos, company officials said Tuesday. …"Responsible Gaming List" by voluntary self-exclusion - or involuntarily if casino employees learn any of its patrons are problem gamblers. A barred person could be kicked off casino property and forced to forfeit all winnings, and will not be able to receive credit, cash checks or receive complimentary services. Adam Goldman, Associated Press, Sacramento Bee, 12-9-03

Nevada gaming regulators plan next year to take another look at the state's 5-year-old problem gambling regulations, Nevada Gaming Control Board Chairman Dennis Neilander said. …"I think it's appropriate for us to go back and look at the five years of research that's been done in the field, and to look at what's been done here and elsewhere, and what's worked and what hasn't worked." Jeff Simpson, Gaming Wire, Las Vegas Review-Journal, 12-16-03

The discussion even did the unimaginable; it caused Las Vegas to be introspective. Sin City, the badge of honor of Vegas, was called into moral question. We could all agree that there is some question about the integrity of the "What happens here, stays here" campaign. Just ask former Moral Czar Bennett about what did not stay here or anywhere private. But "Sin City?" It would be easier to rid Paris of the left bank image or New York of the "Big Apple."

"What happens here, stays here," says the tagline for Las Vegas' advertising campaign invented by R&R Partners and approved by the Las Vegas Convention and Visitors Authority. But does what happens here make Las Vegas worthy of being known as "Sin City?" Certainly not, says Manny Cortez, president and chief executive of the LVCVA… criticized a state ad campaign that made a "Sin City" reference in a print ad that has been approved for publication. …After the meeting, Nevada Commission on Tourism Executive Director Bruce Bommarito said in light of Cortez's remarks, he would review the campaign with DRGM and rethink whether the Sin City reference would stay or go. Richard N. Velotta, Las Vegas Sun, 12-16-03

While domestic expansion opportunities evaporate, international opportunity is still a major story; England and Asia lead the list. Top on most countries' list is England where an expected change in the gaming regulatory environment promises significant opportunity. In Asia, more than one country is examining gaming to generate more for government funds, to stop illegal operators or to stop citizens crossing into a neighboring country to play. Every month at least one country probes the casino issue. Most of it seems to be just talk, but each time there is at least one major American company seemingly ready, willing and able to build a casino. And don't leave the mobile phone from your calculations. New predictions are frequent, but so far not much to get your arms around, only promises of great opportunities. There is one slight surprise, at least for me, Vietnam; 40 years ago I could have imagined returning to Vietnam, but it certainly would not have been to open a casino. Things do change, don't they?

Isle of Capri Casinos, Inc. and Red City Developments officials announced today that the companies have signed a Heads of Terms to develop a regional casino and entertainment complex in Salford, England. The new entertainment complex and hotel, subject to planning and Gaming Board approval, will include a 20,000 seat rugby stadium, approximately 100,000-square-feet of space that will consist of a 50,000-square-foot Isle of Capri casino, entertainment, retail and food-and-beverage areas, as well as other amenities. The site of the new complex at Salford, which is located in northwest England, is six miles from Manchester City Center and one mile from the one million-square-foot Trafford Center retail development. PRNewswire-FirstCall, Yahoo Business, 12-4-03

At least two Las Vegas-based gaming giants seem be setting their sights on developing a major urban casino in Tokyo…Park Place Entertainment Corp. and MGM Mirage have each had discussions with representatives of the metropolitan Tokyo government…Park Place Entertainment Corp. spokesman Robert Stewart added that Japan represents "a significant market opportunity." Rod Smith, Gaming Wire, Las Vegas Review-Journal, 12-13-03

Vietnam's Ministry of Planning and Investment has said "Viva Las Vegas!" to a proposal for the communist country's largest-ever resort and casino - but now it's up to the prime minister to place his bet on the venture, an official said Monday. The proposed $1 billion Las Vegas-style…five-star Vina Las Vegas resort would be backed by U.S. companies Global C&D Inc. and Lehman Brothers Inc…include 8,000 to 10,000 luxury hotel rooms, four casinos, a golf course, apartment complex and convention center… Associated Press, Miami Herald, 12-29-03

While needing to overcome some significant regulatory and legal hurdles, worldwide revenues for all forms of gambling on mobile phones can reach $16 billion by 2008, according to a new research report: "Mobile Gambling: Casinos, Lotteries & Betting", now available from Alexander Resources, a leading research, consulting and education firm specializing in wireless communications. New 2.5G and 3G wireless technologies and phones will play a prominent role in the growth of mobile gambling. …these new networks and devices will allow real-time, dynamic and peer to peer betting. PRnewswire, Yahoo Business, 12-9-03

Anchor-ization of IGT continues; IGT dominates the slot market in the United States, but of late, Anchor gaming has come to dominate IGT. First TJ Mathews assumed the helm and now David Johnson joins him in steering the IGT ship through the seas of the American gaming market.

International Game Technology has announced the appointment of David D. Johnson as Senior Vice President, General Counsel and Secretary. …Before joining IGT, Mr. Johnson served as General Counsel to Anchor Gaming, and prior to that, he served as Senior Vice President, General Counsel and Secretary of Alliance Gaming Corporation. PRNewswire-FirstCall, Yahoo Business, 12-24-03

Meanwhile, Mikohn struggles to find a market, a business model as Denny Garcia leaves. IGT may be undergoing some subtle changes; at Mikohn the changes are rarely subtle. Since the mad acquisition days of the early 1990s, Mikohn has struggled to find a business model that works. Systems, signs, meters or slots, sales, participation or distributorships, there is magic in one of them, but which one? Ten years after Denny joined the company in a merger, signs have lost their luster, so have the systems that lie scattered across the country like ghosts reminding purchasers of another Mikohn, and table game technology too is no longer mentioned in press releases or revenue projections. Slot machines are the core of the business today. Are they for sale, or can they only be rented by the day? Are Russians eager to make wagers on Garfields, battleships or other trivial American pursuits?

Mikohn Gaming Corporation today announced that Denny Garcia, Executive Vice President has informed the Company that he intends to retire, effective December 31, 2003. Denny Garcia joined Mikohn Gaming following the successful merger of his companies, Casino Signs North and A & D Sign Manufacturing, Inc., with Mikohn Gaming in 1993. Business Wire, Yahoo Business, 12-23-03

Mikohn Gaming Corporation is pleased to announce an exclusivity agreement with Park Place Entertainment Corporation for the distribution rights to its new Garfield(TM) slot game. Under the terms of the agreement Park Place will have a 90-day exclusive in each of the U.S. markets in which it operates casinos. Business Wire, Yahoo Business, 12-23-03

Mikohn Gaming Corporation today announced that it has received approval from the Alcohol and Gaming Commission of Ontario to place Mikohn's BATTLESHIP® Winning Encounter(TM) at racetracks throughout the province which utilize the CasinoLink(TM…Mississippi Gaming Commission has issued their approval of Mikohn's TRIVIAL PURSUIT® Easy as Pie… Business Wire, Yahoo Business, 12-23-03

Mikohn Gaming Corporation today announced that it has signed non-exclusive distribution agreements with two Russian based distributors. Business Wire, Yahoo Business, 12-23-03

Multimedia, on the other hand, knows exactly where its market is and what product it sells. Multimedia was not exactly a household name in the gaming industry a year or two ago, but with Alliance and IGT both declaring intent to enter the Class II market, Multimedia, the market leader, is getting more notice and more sales. This sale represents a major step for California tribes. These games are not regulated by tribal-state compacts and, therefore, will not be subject to any tribal-state revenue sharing that Governor Arnold may be able to negotiate.

Multimedia Games, Inc. announced today that it has installed the first 267 Point-of-Sale Terminals for a new Tribal Instant Lottery Game at the Pechanga Resort & Casino in Temecula, California. …Multimedia has converted 267 of its Class II player stations already installed at Pechanga to new units for the TILG system, which are located in the main gaming room of the casino. Approximately 130 remaining Multimedia Class II player stations will remain installed in overflow locations at Pechanga to meet periods of high customer demand. Business Wire, Yahoo Business, 12-22-03

Multimedia Games, Inc. announced today it has entered into a definitive agreement to install its interactive electronic standard-sequence bingo game player stations at VictoryLand Dog Track in Shorter, Alabama, marking the Company's entry into the charity bingo market. Multimedia Games ("Multimedia") expects to install approximately 300 bingo player stations at VictoryLand prior to the end of 2003. Multimedia will participate, on a recurring basis, in the net gaming win of the installed charity bingo units. - Business Wire, Yahoo Business, 12-17-03

As 2004 begins, the economy is on the upswing, but domestic expansion is not. Problem gambling has become a recognized industry issue by industry leaders, finally. Expansion is moving off shore; Internet gambling is still creeping on shore. IGT leads the way in the world of slots, but is following Multimedia into Indian country; Alliance and others are also in the line. If the end of the year's news is to be taken as a sign of things to come, 2004 should be a better year. There are still states discussing expansion, but tax increases are also still being discussed.