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Rod Smith

Global Gaming Expo: Insiders: Slots Not Slowing

5 October 2004

Despite grim prospects for several Nov. 2 ballot initiatives aimed at legalizing or expanding gambling, manufacturers and industry insiders at the Global Gaming Expo's opening sessions were betting slot machines sales will enjoy a big surge in the next two years.

Their arguments, however, have shifted. Rather than state fiscal crises driving expansion, the "domino effect" -- don't let neighboring states tax your residents -- will keep overcoming local opposition to new gaming, they said.

Specifically, because Pennsylvania enacted a law in July to allow slots at tracks, neighboring states -- especially Maryland, Ohio, Kentucky and New York -- are expected to hustle to keep their residents from driving across state lines to gamble, Orrin Ediden, executive vice president of WMS Gaming, told a packed meeting room of G2E attendees at the Las Vegas Convention Center.

There's at least a 50-50 chance Florida will move to legalize slots at tracks, despite vocal opposition from Gov. Jeb Bush, to head off competition from new resorts likely to be created around expanded racetrack operations with casinos in the Northeast.

There's also likely to some growth in table games, with West Virginia already moving to expand casino operations in anticipation of the rush to add slot machines around the Mid-Atlantic region, said Tim O'Leary, business development manager of Scottsdale, Ariz.-based Atronic Americas, a slot machine manufacturer with operations in Las Vegas.

Slot makers and industry insiders also agreed that while two ballot initiatives in California are likely to fail, the push behind new compacts to expand tribal casinos will only grow, adding to the push for the expansion of manufacturing operations.

Altogether, there was general agreement that over the next two years, racetracks and tribal casinos will order 150,000 more slot machines, possibly even 175,000 units, increasing the number of slots in use in the United States from 650,000 to 800,000 by late 2007.

The main driving force will be the entry of Pennsylvania into the racino business. That will be followed closely by an expected response from New York and added slots at California's tribal casinos.

Pennsylvania alone is expected to offer up to 61,000 slots at tracks within the next two years, although the state's top gaming regulator has yet to be named and regulations have yet to be adopted.

While Roy Garrett, director of new business development at the Bally Gaming and Systems division of Alliance Gaming, said projections for Pennsylvania may be optimistic because of regulatory delays, he expects at least 45,000 new slots to come online.

The expansion in Pennsylvania is virtually certain to draw a proportionate response in Maryland, which has been slow to legalize slots at tracks, and from there the dominos will keep falling, said Bill Bartolomay, director of new market development at WMS Gaming.

"Ohio will be a tough sell as long as Gov. (Bob) Taft is there, but it'll be examined closely. New York is the most likely to move because it'll get penalized the most by Pennsylvania," he said.

The experts agreed other states should learn from the example in New York, where slots at tracks were authorized after the Sept. 11, 2001, terrorist attacks when the state needed money to pay for lost revenues.

New York track operators retain 20 percent of the money played in slots, while they will keep 48 percent in Pennsylvania.

As a result, the tracks in Pennsylvania will add a broad range of amenities, in effect creating new destination resorts with which the modest slot operations in New York will be hard pressed to compete.

Other states where chances are improving for expanded gaming include Illinois, Indiana, Iowa, Michigan and Texas.

In Illinois, for example, Gov. Rod Blagojevich seems to have suddenly realized he needs the support of Chicago Mayor Richard Daley to be re-elected. Daley wants casino gambling in Chicago and expanded gaming in Illinois.

In Indiana, talks have bogged down over how much gambling should be expanded and when, rather than whether there should be an expansion or not.

In Iowa, a 1998 moratorium has been tagged unconstitutional by the courts and discussion is under way on how to move toward limited expansion.

In Michigan, the main issue is how severely to limit any expansion that does occur, and in Texas, the issue is where legalized gambling will get its foot in the door.

But there was one conclusion on which all the manufacturers -- happily -- agreed. Whatever the momentary setbacks, they see few limits on the expansion of slot machine operations in the United States, especially in the near term.

Global Gaming Expo: Insiders: Slots Not Slowing is republished from