Gaming Guru

Quicktakes: The month's trends in a glance - September 2006

Americans' faith in the economy tumbled in August to a nine-month low, which could translate to tightened purse strings if job growth stumbles or fuel costs rebound. Job-related worries were the big reason consumer confidence fell more than expected this month to its lowest level since November. In July, unemployment rose to a five-month high of 4.8 percent. But analysts expect job creation and personal spending for August to come in higher in reports…pump prices have fallen more than 5 percent over the past month - providing some relief in people's travel budgets. Furthermore, consumers surveyed reported small increases in their plans to buy homes and major appliances, despite their dwindling confidence. Madlen Read, Associated Press, 8-29-06

How the interest rates and housing sales, or the declining cost of oil, will impact the economy or the gaming industry remains to be seen. The results of the industry in July were good, New Jersey was down – you may remember that the governor closed the casinos for a few days, an act guaranteed to hurt revenues. Mississippi is still suffering from comparison to pre-Katrina times, but another three casinos opened in August and beginning in September the comparison will be to a storm-torn industry, not the thriving and healthy industry of the pre-Katrina times. Missouri was down, one percent, but I haven’t heard any good explanations.

Nevada was down (June results), but the state has been on a roll for a while so I suppose one might expect an occasional slowdown – especially given Las Vegas’ distance from Los Angeles and the record gas prices in June.

Medick's telephone survey of Vegas travelers told a different story, that rising gas prices were significantly cutting into travel plans over other activities such as going to the movies or the mall. In fact, close to half of the respondents said they had cut back on trips to Las Vegas as a result of higher gas prices. Drivers also were asked at what point they would stop driving to Las Vegas, a question based on the assumption that most folks have a limit. About half of drivers said they would stop driving to Vegas if prices hit $3.50 per gallon and about 80 percent would stop if gas reaches $4.33 per gallon. With the LVCVA reporting a 2 percent decline in visitor traffic in June and the state noting a 7 percent drop in Strip casino revenue for the month - the biggest dip in three years - even Gov. Kenny Guinn admitted that "an economy based so much on tourism is always at the mercy of higher gas prices and a slowing of the economy." Liz Benston, Las Vegas Sun, 8-28-06

The customers in Las Vegas have to get there, and some additional cost – the question is at what point – is certain to have an impact on Nevada’s gaming revenues. Everything that impacts travel has more of a potential to impact Nevada than it does most of the other states. All of the inflationary indicators are bound to be part of the story of gaming for the next few months at least, if for no other reason than we always need reasons to explain downturns.

Atlantic City: July gaming revenues fall 4.8% to $480.5 million. Reuters, 8-10-06

Colorado: July casino revenue increased to $74.3 million, up 6 percent from 2005. Denver Post, 8-18-06

Delaware: July gaming revenue rose 10.4% with Delaware Park up 15.9%, Dover Downs up 7.5% and Midway Slots at Harrington Raceway up 1.9%. Alan R. Woinski, Gaming Industry Weekly Report, 8-22-06

Detroit: July casino revenues rose 2.7%. Alan R. Woinski, Gaming Industry Weekly Report, 8-22-06

Connecticut: July slot win rose 1% to $ 160.3 million. New London Day, 8-15-06

Illinois: July gaming revenues rose 6.1% to $171.2 million. Alan R. Woinski, Gaming Industry Weekly Report, 8-14-06

Indiana: July gaming revenue rose 0.8% to $221.2 million. Alan R. Woinski, Gaming Industry Weekly Report, 8-14-06

Iowa casino revenues rose 10.9% in July to $111.9 million. Racetrack revenues rose 22.8%. Alan R. Woinski, Gaming Industry Weekly Report, 8-22-06

Louisiana's casinos won $226.6 million compared with $217.7 million in July 2005, a 4% increase. Associated Press, 8-15-06

Mississippi: July gaming revenues decreased 6% to $222.7 compared to $237.6 million in 2005. Associated Press, 8-16-06

Missouri’s gaming revenues dropped 1% to $136.1 million in July. Rick Alm, Kansas City Star, 8-15-06

Nevada's June gaming revenue fell 3.5% to $921.1 million. Reuters, 8-10-06

The expansion of gaming across the country has been continual since the first state authorized a lottery in the 20th century – nothing in the 19th century fits into a 20th or 21st century narrative. The latest group of new states to authorize additional gaming fit into the same basic pattern. First, after some debate in and out of the legislature, a ballot initiative is permitted. Next, the voters approve some specific form and location for gaming, such as in Pennsylvania where the voters approved a general location and the type of gaming. And finally, regulators begin to develop the regulations, grant licenses, and allow operations to begin. Well, that is what is supposed to happen; we are still waiting for the final step in Pennsylvania and Florida. And while we wait the opposite is working to reverse the process. There have been numerous amendments to the law proposed in Pennsylvania, and lawsuits have been filed in both states.

In Pennsylvania the lawsuit failed, but it did add months to the process, and in Florida we don’t know the outcome yet, but the first ruling does not bode well for those who want slot machines.

Concerned with the possibility of widespread petition fraud, a three-judge appeals panel has just ordered a trial court to invalidate Broward County's successful slot-machine ballot vote if it determines the law had been broken. The 2-1 decision by the First District Court of Appeals could deal a crippling blow to the four parimutuel facilities that were banking on the slot machines….'Today's ruling gives us hope that the concerns about fraudulent signature gathering -- including dead people signing petitions -- during the petitioning process for the slots measure will be examined by the courts,' Wayne Pacelle, president and CEO of The Humane Society of the United States, one of the plaintiffs in the case, said in a press statement. Marc Caputo, Miami Herald, 8-006

While a court investigates the slot petition process, another case has entered the court system. An adult arcade owner is being tried for operating illegal games, slot machines. The defendant says they are legal and just amusement games for old folks. Depending on the outcome in the two cases, Florida could end up without slot machines at racetracks or any place else, or with slot machines every place but racetracks, or with slot machines everywhere, but only the ones at the track would be officially called slot machines.

Adult arcades like the Tropicana Rec Room in Pompano Beach offer senior citizens amusement, a chance to earn prizes, a free hot lunch and companionship -- all for eight cents a game. But the Broward State Attorney's Office says the Tropicana's arcade games are programmed to cheat players, and have charged owner Gale Fontaine, 56, with operating an illegal gambling house, violating lottery laws and possessing a slot machine. Nikki Waller, Miami Herald, 8-8-06

It is not easy to figure out what is legal and what is not. It gets worse. In Missouri officials have estimated that there are as many as 5,000 illegal slot machines operating. Missouri does have legal slot machines, but only on licensed riverboat casinos. The gaming regulators say they can’t do anything because they only regulate legal casinos, not illegal ones. The police say it isn’t their job and isn’t worth the effort. However, there are some politicians who would solve the problem by authorizing charity casinos.

A donnybrook is brewing in Jefferson City over illegal gambling. A proposed statewide investigation would focus on ubiquitous “gray market” slot machines that are played openly around the state at truck stops, fraternal clubs and convenience stores. Other questionable activity, including sweepstakes and barroom poker, also could get a close look. One expert estimates that at least 5,000 bootleg slots are in action daily around Missouri — and maybe three or four times that number. Many are said to be salvaged arcade video games given new life with gambling software… A small but influential contingent of state lawmakers is adamant about legalizing slots for nonprofit civic organizations. Rick Alm, Kansas City Star, 8-9-06

One of my favorite topics is the risk in operating a casino; the risks are not from the customers or criminals, but from the government and regulators. Unstable tax rates, the high cost of regulation to operators and changing legislation all add to the risk, such as the regulation that came into effect this month in Illinois that requires identifying all customers who appear to be 30 years old or younger. The stated intent of the Illinois regulation is to eliminate underage gambling and help screen for gamblers who had asked to be banned from the casinos. A seemingly innocuous regulation, it is the precursor to investigation checks on every customer – and possibly using a national data base for criminal, child support, self-banned customers, and any other cause the government wants the casinos to enforce. Besides the issue of making – as in the banking act – a governmental enforcement agency out of each casino, there is a huge additional cost to such procedures.

The risk internationally is even greater and more complicated. Russia appears to be a great market, but it is impossible to guess what regulation and taxes might be coming next.

If the rest of the mainstream population begin to join the few casino high rollers, Moscow could eventually be the next hotbed for casino gambling investments, just as Asia was a few years ago…the Russian parliament said that the country’s gambling industry has reached a size of over $6 billion in total wagers…most of the money is wagered in Moscow gambling casinos and slot machine halls. Moscow News, 8-22-06

In Korea there is a shakeup that may lead to removing 60,000 machines, not a good situation if you were selling slot machines or operating one of the slot arcades.

The prosecution is considering seizing from gambling parlors illegally reprogrammed video slot machines, which provide larger jackpot winnings than legally permitted, officials said Monday. About 60,000 such game machines are in operation at arcades around the country, according to police. Kim Tong-hyung, Korea Times, 8-22-06

But the crowning story of the month is from Macau. We are being prompted almost daily with the size of the market, the profitability of the LV Sands and the coming of Wynn Macau.

Macau…collected 1.35 billion U.S. dollars in direct gaming taxes in the first seven months of the year, a year-on-year rise of 13.7 percent…. Chinese People’s Daily, 8-22-06

Macau's expected gross gaming revenue in 2007 would rise an estimated 18 percent to $8 billion. Associated Press, 8-24-06

This month, however, Stanley Ho – the long time godfather of gambling – said many of his places would be declaring bankruptcy. He blamed the cutthroat competition from the LV Sands.

Stanley Ho, Macau's gaming magnate, said one-third of his casino unit's VIP gaming halls face bankruptcy and thousands of jobs are at risk due to cutthroat competition…blamed the Sands Macau… Shanghai Daily, 8-14-06

And then some demonstrated real cutthroat competition by killing two casino managers. The local press warns that the old gangs that control the casinos won’t tolerate a loss of their cash cow. Now that is risk.

Macau authorities are worried about a resurgence of casino-related crime…Ms Chao Yuek-hong, the executive director of the Golden Palace VIP room in Casino Lisboa, was found slumped in the front seat of her car with her throat slit…husband, Mr Lam Pou-sang, a manager at the casino, was also found blindfolded with multiple stab wounds, reported the South China Morning Post… News Paper, Asia, 8-22-06

The Sands and Wynn do not seem to be intimidated. The Sands just opened an expansion and now has 735 table games – the largest pit in the world – and is building another billion dollar plus casino. Wynn is set to open in September. Analysts are now predicting that in the future LV Sands will get 80 percent of its revenue from Asia – Macau and Singapore. Obviously where I see risk, some people see opportunity.

Years ago a controversial defense entered the American lexicon: Twinkie defense. It became a popular joke – like the old Daniel Webster one – the Twinkies made me do it. The defense was a variation of one of the most famous defenses of the twentieth century, the insanity defense. The punch line is basically the same; “I am not responsible, Mr. Judge, I cannot control myself.” The twenty-first century is adding a new chapter and a new phrase to the legacy [lexicon?] of uncontrollable impulse defenses. The addictive gambler who embezzles, commits armed robbery, or steals from his family, friends, or church is becoming more and more common. I am not an attorney or a psychiatrist and cannot say for certain that the gambling addiction and subsequent crimes are uncontrollable and therefore should receive special treatment in law, but I can say for certain that it is becoming a very common defense. No person to my knowledge has been sentenced to treatment instead of prison yet, but some have had their sentences reduced and ordered into treatment.

An internet gambling addict has been jailed for milking his employers of £1m to fund his habit…Benjafield had a salary of about £16,000, but regularly spent more than this annual income a day on online betting using company money. BBC News, 8-1-06

Richard Davenport, the former lawyer for John Ascuaga's Nugget who pleaded guilty to embezzling $3 million over 15 years, suffered from a gambling addiction that took him to the brink of suicide and left him with no wife, no assets, but in deep remorse, his lawyer said… Martha Bellisle, Reno Gazette-Journal, 8-24-06

A former bookkeeper for a doctor's office pleaded guilty Wednesday to stealing more than $2.3 million from her employer, money she poured - as much as $6,000 a day - into buying lottery tickets…with nearly $1.4 million stolen in 2005. 1010 Wins, 8-24-06

The son of former Mobile County Sheriff Tom Purvis, has been sentenced to a year and a day in prison after gambling with $150,000 worth of stolen money at Mississippi casinos…James Purvis must also participate in gambling addiction and alcohol treatment as well as participate in a drug testing program. Associated Press, Sun Herald, 8-24-06

A borough tax collector in Bedford County misappropriated more than $127,000 to feed her gambling addiction…Carol Ann Shaffer, 42, told police she used cash advances from her credit card to buy lottery tickets, then raided the Manns Choice Borough tax account to pay her credit-card bills… Associated Press, Pittsburgh Post Gazette, 8-24-06

It is a problem that is not going away and one that the industry is going to have to help solve. The Illinois identity check, as unpleasant as it may be, may be one of the steps. The states that have self-ban lists are having mixed success, but Missouri appears to feel it is working. According to their records an average of 145 people a day sign up to be banned from the casinos. It may not be a perfect answer and it does address lotteries or online gambling, but it is a place to start. And a national database – enforced in every jurisdiction – that might include self-banned gamblers as well as those such as the son of the deputy sheriff in Alabama could be an effective method also.

Thousands of gambling addicts who have permanently banned themselves from Missouri's casinos won't get a chance to reconsider – at least not yet. On Wednesday, the Missouri Gaming Commission rejected a plan that would have let problem gamblers remove their names from the banned list after two years. Though the vote was 2-1 in favor of the change, it failed because three votes were needed. The commission has two vacancies. Chairman Noel Shull, who cast the negative vote, said more study was needed on whether two years is long enough….Under the proposal that the commission rejected, gamblers could have petitioned for removal from the list after two years. To be eligible, they could have accumulated no trespassing convictions for entering casinos during the banned time. Virginia Young, St. Louis Post-Dispatch, 8-24-06

Massachusetts is expanding its outreach program to a specific community, with a program geared to match a casino marketing campaign aimed at the reputation of Asians as being “big” gamblers. The answers may vary, but the question is constant and becoming a louder and louder issue – how to deal with the existence of a significant number of people who are addicted to gambling and may commit the same anti-social acts as other addicts?

…hire a Mandarin-speaking coordinator and train social workers to treat Asian gambling addicts. The Massachusetts Council on Compulsive Gambling is taking aim at a new group — Asian gamblers. The council is dedicating $100,000 from the state Lottery to the new effort, the largest amount they've ever used to address a single demographic group…Casinos have been aggressively marketing to Asians in recent years. Lottery Post, 8-23-06

Poker players in some states are becoming political activists and though their cause may not be as noble as that of the colonists who fought the British or the civil rights workers who went to jail in the South, these modern day activists are going to jail for their cause: poker. Unlike the CEO of BetOnSports who went to jail for his business activities, they are players, playing the game, though of course they hope to profit from their activities. These two, one in Alaska and one in Texas, have become known for their poker playing and poker advocating; now they are also known for their poker suffering.

City and federal authorities conducted a raid last week on a Midtown house where local gamblers have gathered for years for illegal poker games, police said. The midnight raid on a two-story, single-family home at 4100 Arctic Blvd. found several employees and nine players on the premises…No one was arrested, but thousands of dollars from two Texas Hold 'em poker games was seized, and police said they are continuing to investigate. The raid last Tuesday night follows two others made this spring by the police, which this year has made vice crimes, including gambling, a higher priority. Police said they hope the raids send a message to would-be gamblers to stay away from illegal gambling houses, which, according to police, often attract other crimes. Megan Holland, Anchorage Daily News,

It was 10 pm on a Tuesday night in the high-end district of Shavano Park when the news broke on WOAI News 4 in San Antonio, Texas. An illegal gambling warrant had just been executed at the home of 2006 World Series of Poker sixth place finisher, Richard Lee. It seems the final table of the WSOP has been plagued with controversy, and just when the Gold vs. Leyser $6 million lawsuit began to lose momentum, another shocking headline became fodder for the press. According to news station WOAI, vice officers executed a warrant to break up an alleged illegal gambling operation at a home owned by a recent WSOP poker champion…Confirming that information was a man identifying himself as Lee's lawyer who stated that the home's owner is the same Richard Lee who placed 6th at the World Series of Poker and won nearly $3 million a few weeks ago. Card Player, 8-30-06

The election season is upon us; for the next two months we will experience with increasing intensity the rhetoric of the campaigns. This election, like most in the last few years, will feature gaming in two categories; first, there will be campaigns particularly for governor where gaming will be a major issue. In Illinois and in Texas, for example, one candidate in the race is advocating expanding gaming to help meet the state’s financial obligations.

Republican governor candidate Judy Baar Topinka called today for the creation of a Chicago casino as the centerpiece of her four-year revenue plan for the state, contending it would generate billions of dollars to help fund schools and provide property-tax relief. Rick Pearson, Chicago Tribune, 8-23-06

Texas Comptroller Carole Keeton Strayhorn took her gubernatorial campaign on…tour…outlining her proposals to give teachers a $4,000 pay raise and to offer free community college for every high school graduate…Funding for her proposals would come from legalizing video slot machines where gambling is already allowed. Lynn Brezosky, Associated Press, Dallas News, 8-30-06

The other case is where gaming itself will appear on the ballot for expansion. As it sits today, Nebraska, Ohio, and Rhode Island will be voting on some form of gaming expansion, that is, if the current legal challenges fail. And, at least in Rhode Island, there will be millions of dollars spent on the campaign, and both Ohio and Rhode Island have some very well known politicians and former governors leading the opposition.

Lincoln Park and Newport Grand stepped forward yesterday as major backers of the opposition effort. The two established gambling venues have made an "initial investment of $1 million" in the campaign by the coalition -- known as Save Our State -- that is leading the fight against the proposed constitutional amendment on the Nov. 7 state ballot.. Harrah's spent close to $2.7 million last month alone on TV, radio and newspaper advertising and the hiring of 50-plus staffers to promote the proposed Harrah's-Narragansett casino in a privately owned West Warwick industrial park. Katherine Gregg, Providence Journal, 8-30-06

U.S. Sen. George Voinovich has launched a battle against a November ballot initiative to substantially expand gambling in Ohio…is lobbying newspaper editorial boards across the state, as well as social service and religious organizations, to join an effort to defeat the proposed constitutional amendment. He and other opponents are trying to raise $1 million to $1.5 million to run ads urging voters to reject the proposal. Stephenie Steitzer, Cincinnati Enquirer, 8-16-06

Attorney General Jon Bruning continues the push to keep a vote to legalize up to three casinos off the November ballot. Omaha News 6, 8-30-06

Gaming has some ups and downs to look forward to in the waning months of 2006. The economy is always a tricky component and promises to continue to offer challenges for gaming operators. The federal government and some state governments are “cracking down” on what they judge to be illegal activities – activities, namely poker and sports betting, that are so ingrained into our society that prohibiting them is much like prohibiting the consumption of alcohol 80 years ago. They are so much a part of our society that making them the subject of mass law enforcement would have a major impact on our entire society. I hope all agencies and legislators tread softly, for this is a very slippery slope.

Mississippi is rebuilding; Pennsylvania and Florida may indeed get some operations open before the end of the year. Voters in Ohio, Kansas, and Nebraska will most likely vote on expanded gaming; and in a number of states, most notably Illinois and Texas, gaming will be an important factor in determining the outcome of local elections. The importance of gaming at the polls is just one more illustration of how much a part of the American culture gambling is, but then that is true in most of the world, isn’t it?