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

14 January 2004

The economy continues to show very strong growth, although the
Dow Jones Industrial Average did not change much during November, finishing the
month down slightly. Overall gaming results were not dramatic either, most jurisdictions
had modest growth at best, but Wall Street and the rest of us will have to adjust
to that trend, as gaming is no longer a growth industry. Improvements in revenues
and margins will be difficult to come by with limited opportunities for expansion,
increased competition, taxes and inflation driving up operating costs. To help
us understand the trends, Bear Stearns has rejoined the industry with an analyst
to replace Jason Ader, Mark Abramson; his first effort covers 16 gaming companies
and predicts modest growth.

Robust business and consumer spending powered the U.S. economy
ahead in the third quarter at an even brisker clip than first thought, the
government said on Tuesday in a report that also showed the biggest corporate
profits jump in more than a decade. GDP shot up at an 8.2 percent annual rate,
more than double the second quarter's 3.3 percent gain and the strongest quarterly
advance in 19-1/2 years. … Reinforcing an impression that a stronger-paced
recovery was gaining traction, a separate private-sector report found consumer
confidence hit a year-high peak in November, buoyed by hopes of improved hiring
prospects. The New York-based Conference Board said its index of consumer
confidence climbed to 91.7, its highest level since September 2002, from a
revised 81.7 in October. Wall Street analysts had forecast a rise to 85.0
…Consumer spending, bolstered by tax cuts, grew at a revised 6.4 percent
annual pace in the third quarter, below the 6.6 percent pace estimated a month
ago but well ahead of the second quarter's 3.8 percent. …Corporate profits
after tax climbed at a 10.6 percent annual rate during the quarter, a sharp
change from the second quarter's 5 percent contraction. Commerce said it was
the strongest pickup in profits since a 12.4 percent jump in the fourth quarter
of 1992. Glenn Somerville, Reuters, Yahoo Business, 11-25-03

Filling a hole left with the departure of a perennially top-ranked
analyst earlier this year, Bear Stearns re-initiated coverage of the gambling
industry Friday with a sector rating of "market weight" and a "preference
for equipment over operators." Mark Abramson, replacing Jason Ader who
left in February, rolled out his ratings on a total of 16 companies -- 12
casino chains and four equipment makers. "Put simply, we expect only
modest acceleration in the rate of growth in spending on gaming as an economic
recovery gains traction and household income and employment rise," wrote
Mark Abramson. William Spain,, 11-21-03

Every year for the last ten or so Harrah's has commissioned
a study of American gaming behavior; one of the most quoted statistics is the
number of casino visits per household and the number of households with at least
one casino visit during the year. Over the course of a decade, it has been possible
to see casino gaming creep deeper and deeper into American life.

There are other ways to see the change, television, for example.
Scenes from Las Vegas and gaming in general are becoming common enough, not
just in the story lines but also in advertising, to cause some notice. The most
notorious is of course the current Las Vegas Convention and Visitor Authority's
ad campaign: "What Happens Here, Stays Here." The stories are a tad
racy and suggest that you can come to Vegas and let go, but no one back home
will ever find out, unless of course you are William Bennett, but that is another
story. The stories may be edgy, but they are also on the edge in advertising
images and production; suggesting in a subtler way that Las Vegas is as hip
as New York and Los Angeles combined, but more fun.

Like 'em or not, more "Vegas Stories" ads are on
the way. In the 10 months since the Las Vegas Convention and Visitors Authority's
popular but controversial advertising campaign first aired on television stations
in the United States and Canada, the "What happens here, stays here"
spots have generated a maelstrom of attention -- both positive and negative
-- for the city's tourism industry. The National Football League's refusal
to air the ads during last January's Super Bowl broadcast was only the beginning.
Since then, some viewers have blasted the spots for promoting what they believe
is an unflattering image of the city's "anything goes" attitude.
Others, including advertising critics and a plurality of surveyed USA Today
readers, instead lauded the ads' effectiveness and unique style. Chris Jones,
Gaming Wire, Las Vegas Review-Journal, 11-12-03

Advertising Las Vegas or Atlantic City directly and, of course,
casinos all over the country including Indian casinos, is not the only way that
gaming gets into the living room of every American family. Other advertisers
and medium are using gaming as a setting for their stories and products.

Decades after Elvis Presley warbled "Viva Las Vegas,"
marketers, agencies and media companies are lustily joining the chorus, flooding
the commercial culture with images of gambling and Las Vegas to woo consumers.
…Another sign of the broadening interest in gambling is a magazine named
Vegas, introduced in June as a joint venture of a company outside Las Vegas,
SoBe News, based in Miami, and the Greenspun Media Group, whose headquarters
are in the Las Vegas-area city of Henderson. Greenspun Media is a sister company
of the Las Vegas Sun. Of the 80,000 copies of each issue of Vegas printed,
65 percent to 70 percent are distributed outside Las Vegas, in cities like
Dallas, Los Angeles, New York, San Francisco and Seattle. Stuart Elliott,
New York Times News Service, Las Vegas Sun, 11-12-03

Gaming has become so common an image that no one should be surprised
to turn the channel and find a blackjack gaming show. An all gaming channel
is coming next. The announcement by Game Show Network claims the show will be
the first, not even close. In about 1980, the Wide World of Sports broadcast
a blackjack tournament produced by International Gaming Promotions; IGP continued
to promote casino gaming tournaments, though not on television, and went public
as Players International in 1984.

Today, a poker tournament broadcast on the Travel Channel and
advertised on network TV during the Super Bowl, is described as being wildly
popular. Just a few years ago the idea of a cowboy winning a million dollars
playing poker on television would have seemed highly improbable, if not impossible.

The trend of turning existing card games into TV game formats
continues as stateside cable station Game Show Network lines up its first
casino game series, based on blackjack. The World Series of Blackjack will
air from spring 2004 as a weekly reality show in which the world's leading
blackjack players and regular tournament gamblers will compete … series
will adopt the reality TV style, with pre and post-game interviews with winners
and losers, plus expert commentary. Ed Waller, C21 Media, 11-12-03

With a live television audience cheering him on, an Alabama
cowboy who hid his expressions behind dark glasses won $1 million Monday in
the World Poker Finals at Foxwoods Resort Casino. Foxwoods was the fifth stop
on the World Poker Tour, the Travel Channel's wildly popular Wednesday night
"reality" poker series. Karen Florin, The Day, 11-18-03

NBC is teaming up with WORLD POKER TOUR and Travel Channel
to bring the smash hit cable series to network television on Super Bowl Sunday,
February 1, 2004, from 4-6 p.m. (ET). …"With the World Poker Tour
becoming one of the fastest growing and most talked about new properties on
television, we are looking to create a showcase event," said Jon Miller,
Sr. VP, Programming, NBC Sports. "Super Bowl Sunday is the perfect day
to present the World Poker Tour to a network audience for the first time."
Business Wire, Yahoo Business, 11-21-03

The story of the two blackjack tournaments demonstrates the
principle of timing. When John Romero and his partners first produced their
tournaments they were very, very successful. The success of the casino tournament,
however, did not translate to success on Wide World of Sports. Even Romero says
it was boring as broadcast back then. But the audience and the players were,
by today's standards, very sophisticated and limited. Today's audience is not
sophisticated, but much broader; today gaming is in everyone's living room.
You may not be part of the over 50 million households that visited a casino
last year, but for certain a casino visited your home last year.

The path into your hearts through advertising is well established,
but here is a new twist. Houses of prostitution in Nevada are testing the advertising
waters using the legal logic that gaming used to overcome federal statutes that
limited gaming advertising.

Nevada, alone in the nation, allows legal prostitution in
the majority of smaller counties that have chosen to tolerate the trade. But
Nevada Revised Statutes 201-430.2 specifies: "It is unlawful for any
person knowingly to prepare or print an advertisement concerning a house of
prostitution not licensed for that purpose ... in any county, city or town
where prostitution is prohibited by local ordinance or where the licensing
of a house of prostitution is prohibited by state statute." Is that advertising
ban constitutional? Las Vegas hotel-casinos run advertisements in national
publications, which almost certainly reach markets where authorities bar some
forms of casino gaming. In fact, the U.S. Supreme Court has consistently held
that if a business is operating legally in its own jurisdiction, it is offered
First Amendment protection. The Chicken Ranch now appears ready to test the
timeworn Nevada anti-advertising statute, having placed small ads in recent
editions of two Las Vegas alternative newsweeklies. Editorial, Las Vegas Review-Journal,

And that is the charm and the horror of Pandora's box. Once
it is open, it is open and everything inside eventually finds its way out. Regardless
of what happens with prostitution and advertising, one thing is certain, gaming
is now mainstream. No longer confined to the deserts of Nevada, casinos are
everywhere. But there is more, in taverns all over the country, as was evidenced
this month in Michigan. Games like keno are moving closer into the neighborhoods,
softening the resistant, while the blinking ubiquitous television set is extending
gaming to potential markets by showing the excitement of Vegas, blackjack and
the multimillion lottery winners.

Steve Wynn always gets more attention that anyone else; whatever
he does or says is newsworthy. This month Wynn took the board of directors on
an Asian tour. Wynn wanted to see more and expose the Americans on the board
to the potential of the market. They were wowed; gambling is alive and well,
with more mainline Chinese coming to play every day. Stanley Ho's company declared
earnings of $2.8 billion for ten months; those numbers will excite more than
Steve Wynn and his board of directors.

It's full steam ahead for Wynn Macau, Strip developer Steve
Wynn said Monday. …"I think the company will be more Chinese than
American," he said. "This comes from a guy who's building a $2 billion
hotel on the Strip." …"The energy, the vitality, the explosive
power of the (Chinese) marketplace has to be seen to be believed," Wynn
said. Jeff Simpson, Gaming Wire, Las Vegas Review-Journal, 11-18-03

With their rising affluence, many Chinese are becoming attracted
to the former Portuguese enclave's reputation as one of the region's major
gambling centers. …When restrictions on individual travel were recently
relaxed, Macau saw more tourists coming from Beijing, Shanghai and some parts
of Guangdong. …The former Portuguese enclave has already seen overall
visitor arrivals jump by 13 percent this year and indications are the numbers
will continue to rise. Melissa Heng, Channel News Asia, 11-4-03

The gaming industry in Macau contributed over 9 billion patacas
(1.125 billion US dollars) to the Macao Special Administrative Region (SAR)
government's tax coffer in the first 10 months of the year…Macau Gaming
Holding Company (SJM) earned 22.4 billion patacas (2.8 billion US dollars)
in pre-tax revenue in the first 10 months. China, 11-14-03

However, don't expect a mass exodus to China by American companies.
Wynn and Sheldon Adleson won the only two licenses that were available. There
may be more later, but for now Steve and Sheldon own the opportunity. Where
does that leave the rest of the American industry to go for expansion and growth?
And we know that Wall Street, stockholders and executives bonuses demand growth?
Welcome to the United Kingdom; after 35 years of highly regulated and restricted
gaming, the doors are opening.

Harrah's Entertainment Inc. said Tuesday it wants to build
two or three destination casino resorts in the United Kingdom in addition
to several smaller regional casinos it had previously committed to build.
Chief Executive Gary Loveman said the expansion into the United Kingdom will
consume most of the company's investment dollars over the next three to five
years. Liz Benston, Las Vegas Sun, 10-15-03

Harrah's Entertainment Inc. has received approval from the
Mississippi Gaming Commission to pursue an Internet casino in Alderney, one
of the British Channel Islands. …Mississippi regulators require state
gaming license holders to receive prior approval for Internet gambling activities
regardless of where the activities are based. Las Vegas Sun, 11-5-03

MGM Mirage said Friday it has received regulatory approval
to acquire a minority interest in a British casino company that plans to open
a casino in England early next year …company said in a statement that
the Gaming Board for Great Britain approved its acquisition of a 25 percent
interest in R.J. Brown Holdings Ltd.'s Metro Casinos Ltd. Associated Press,
Las Vegas Sun, 11-7-03

Park Place Entertainment…scouring the UK for potential
deals following plans to deregulate gambling legislation…has appointed
Peter George, former chief executive of Hilton Group to lead its push into
the UK. Matthew Garrahan, Financial Times, 11-10-03

Harrah's, as are the others, is driven by the need to continually
generate more revenue every quarter. The American market doesn't promise too
many short-term opportunities for growth, and has more than its share of challenges,
including competition, increasing taxes and often strict and expensive regulation.
CEO Gary Loveman has been preaching a more ubiquitous form of gaming for a year
or two. He says that the time will, must come when gaming is available to every
adult American when they wish. He has also preached against increasing tax rates
and highly restrictive and expensive regulation. Loveman has not come out against
either taxation or regulation, but he has been very outspoken about what he
has termed excessive taxes or regulation. Because of those pressures, Harrah's
has announced that the majority of its capital investment will be in the United
Kingdom. But at the same time, Harrah's continues to lead the field in managing
the company as a national brand, and it seems to be paying dividends.

The board of directors of Harrah's Entertainment, Inc. today
declared a regular quarterly cash dividend of 30 cents per share… PRNewswire-FirstCall,
Yahoo Business, 11-4-03

Harrah's Entertainment, Inc. has partnered with Katie Brown,
"the new reigning diva of domesticity," and renowned retailers Calico
Corners, Bed Bath & Beyond and Lowe's to develop a national home makeover
promotion that will reward the casino company's customers and website visitors
with more than $1 million in home makeovers, home improvement gift cards,
cash and prizes. PRNewswire-FirstCall, Yahoo Business, 11-4-03

And before the ink was dry on the announcements from the major
American casino operator, the long awaited British regulations were announced;
but, before anyone could open a bottle of Champagne, it was announced that it
would be another year before they would take effect.

Culture, Media and Sport Secretary Tessa Jowell has released
details of a draft gambling bill…single regulator, the Gambling Commission,
will be created and given strong enforcement powers….There will be no
restrictions on where casinos can be set up, and membership in a gaming or
bingo hall at least 24 hours before playing will no longer be required. Remote
gambling, via the Internet, mobile phones or interactive television, will
be licensed and regulated… BBC News, 11-20-03

Government proposals…have failed to win a place in the
new legislative program, which starts next week. The draft gambling bill will
be mentioned in the Queen's Speech, but will have to wait a further year before….
has a chance to reach the statute book, it was confirmed yesterday. Alan Travis,
Manchester Guardian, 11-20-03

The United Kingdom and Macau may not be the answer for every
gaming company, but they are symptomatic of the issue, the need to grow revenues
and the maturing of the American gaming market. Gaming expansion has slowed
and the costs of operating are increasing. Under those conditions any new jurisdiction
will get all of the major players trying to make a play. Expansion is essential,
Wall Street demands it, stockholders want it and management thrives on it. It
is the easy way to grow revenues and enhance stock prices.

There are really only three things that a company can do to
improve results quarter after quarter; and there are no options, improvement
is demanded. 1) It is possible to reduce expenses and operate more efficiently.
2) It is possible to improve sales with same-store promotions and new production
introductions. 3) But the easy and the favorite method of improving is expansion.
Buy, merge and move into new markets, that's the way.

Gaming is running out of ways to expand. New jurisdictions,
called markets in other industries, require new legislation. And there is a
limit to the number of mergers and acquisitions any one company can make. So
what is a gaming company to do? This month it seems that lots of people are
discovering new opportunity in Indian country.

Alliance, IGT and Harrah's are rushing to Class II gaming, and
thereby new markets, coincidently with less regulation than in the Class III
markets. Stations, Park Place, MGM Mirage the Maloof family of the Palms in
Vegas (see the Press of Atlantic City and LV Review-Journal for 11-14-03) are
also pushing into Indian country like 19th century wagon trains looking for
land and freedom.

Top brass at Harrah's Entertainment hope to leap full force
into Class II gaming some time very soon…tribal leaders are set to go
full-bore into expanding operations outside the scope of the compacts. Top
executives say that Class II expansion also promises to take gambling where
it's never gone before. Las Vegas Review-Journal, 11-3-03

International Game Technology's shares caught a delayed bid
Wednesday, one day after the company announced it would start selling its
slot machines to Indian casinos. Joel Rothstein, The, 11-5-03

Alliance Gaming Corp. announced today that it has signed a
definitive agreement to acquire privately held Sierra Design Group (SDG),
a leading supplier of Class II and Class III gaming devices, systems and technology.
PRNewswire-FirstCall, Yahoo Business, 11-11-03

Last month Harrah's announced that nearly all of the company's
capital investment for the next three to five years will be in the United Kingdom.
This month Harrah's announced a move into Class II games. Park Place, MGM Mirage,
Isle of Capri and others have made similar announcements in recent months about
the UK. IGT and Alliance, within two days of the last election where gaming
was defeated in Colorado, Iowa and Maine, both announced plans to begin selling
Class II games.

The message is clear. The expansion of gaming in the United
States is slowing down; the tax environment is becoming increasingly unstable
as the states struggle to balance their budgets, often with gaming taxes. The
defeat in Maine and the increasing opposition to new casinos in California and
New York indicate a slowing Indian gaming market. Class II is about the only
expansion opportunity left in the United States. Look for more companies to
discover Indian gaming; many tribes seeking recognition are finding willing
financial backers in exchange for a casino management contract once the tribe
gains recognition. And, look for more companies, operators and manufacturers,
to test the rather "gray" waters of Class II.

In recent times, Las Vegas has seen a dramatic increase in pedicabs,
the more modern, but not uniquely American version, of the rickshaw. The Las
Vegas Strip is a very busy place, and traffic moves quite slowly. Walking is
not necessarily an option and certainly not for everyone. The distances on the
Strip are daunting in the best of weather, but in the summer, a three or four-mile
trek down the Strip is an endurance sport, not a stroll between casino attractions.
Into the long, hot walk rides the peddle cab, offering to speed the tourist
from one casino to another faster than cabs and offering a fresh look at the
people, casinos and the excitement of Las Vegas.

Bill Jones makes an adjustment to his pedicab and pedals onto
the Las Vegas Strip where he is swallowed by a sea of evening traffic. Big
buses dwarf him. Cars slide past him. Taxi drivers glower. Cops on bikes size
him up. Tourists see a sinewy, longhaired savior, who can quickly wheel them
through stopped traffic for a thank you and a tip. …have proliferated
in recent months….random survey of drivers revealed at least seven companies
with an armada of more than 70 pedicabs. Adam Goldman, Associated Press 11-13-03

Most cities would kill for that kind of excitement and crowded
streets. Cities everywhere are struggling to find ways to create a vibrant business
environment. Las Vegas is a business success; the billions of dollars invested
along that one street defy the imagination. In all of that money and excitement
is an environment that is singular in the world for its notoriety and appeal.
Pedal cabs don't make Vegas, but they do add to the eclectic atmosphere. And
yet, there are officials who want to kill the fun.

…At a recent public safety meeting, state and local law
enforcement officials declared the pedicab swarm illegal and a potential danger
to tourists. They intend to force the velocipedes into extinction. Adam Goldman,
Associated Press 11-13-03

It would be simpler and less messy if there were no pedal cabs,
but it would be simpler if there were no motor cabs or cars of any kind. In
fact, it would be simpler and certainly quieter if there were no people at all
on the Strip. Of course, public safety and welfare is important, but it is possible
to have different kinds of transportation exist together, just as it is possible
for different business models to coexist in the same industry, as the Strip
proves. The challenge for Vegas and regulators in general is not to prohibit
as much as possible, but to find ways to allow it to develop and flourish in
response to needs and desires of the customers.

Ken Adams

Ken Adams is the principal in the gaming consulting firm, Ken Adams and Associates. Formed in 1990, Ken Adams and Associates specializes in information, analysis, and strategic planning for Indian tribes, casino operations and gaming manufacturers.

Ken spent over 20 years in the hotel-casino industry, prior to founding Ken Adams and Associates. He held the positions of: Director of Casino Operations, Casino Manager, and Keno Department Manager. During this time, he developed numerous innovative marketing and customer development programs and systems for evaluating casino performance. Some of those programs, such as slot clubs and tournaments, have become industry standards.

Ken is also actively involved in gathering and disseminating information that is important to the gaming industry. He is editor and publisher of and the Adams' Report, a monthly newsletter specializing in identifying trends in casino gaming, regulation and manufacturing, the Adams Daily Report, an electronic newsletter that provides electronic links to the key gaming stories of the day, and the Adams Review, a special report distributed by Compton Dancer Consulting that provides editorial commentary on gaming trends.
Ken Adams
Ken Adams is the principal in the gaming consulting firm, Ken Adams and Associates. Formed in 1990, Ken Adams and Associates specializes in information, analysis, and strategic planning for Indian tribes, casino operations and gaming manufacturers.

Ken spent over 20 years in the hotel-casino industry, prior to founding Ken Adams and Associates. He held the positions of: Director of Casino Operations, Casino Manager, and Keno Department Manager. During this time, he developed numerous innovative marketing and customer development programs and systems for evaluating casino performance. Some of those programs, such as slot clubs and tournaments, have become industry standards.

Ken is also actively involved in gathering and disseminating information that is important to the gaming industry. He is editor and publisher of and the Adams' Report, a monthly newsletter specializing in identifying trends in casino gaming, regulation and manufacturing, the Adams Daily Report, an electronic newsletter that provides electronic links to the key gaming stories of the day, and the Adams Review, a special report distributed by Compton Dancer Consulting that provides editorial commentary on gaming trends.