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Rod Smith

Return of Penny Slots

12 December 2003

LAS VEGAS --One of the hot trends on casino floors is the return the thrilling days of yesteryear when it seemed penny slots were king.

Now, casinos are returning to low-denomination slots as ticket-in, ticket-out technology makes the machines more efficient and players tell operators they like the added entertainment time they offer for the same volume of play.

Deutsche Bank analyst Marc Falcone said in a recent report to investors that low-denomination games are helping drive revenue growth by increasing coin-in play, building value for players and shifting play to higher hold games.

"We believe lower-denominated games will continue to account for a larger share of slot revenues and gaming space in future years," he said.

On Wednesday, Aristocrat Technologies, the U.S. subsidiary of Australia-based Aristocrat Leisure Ltd., won approval from Nevada regulators for its newest progressive penny slot machines.

It also reached an exclusive agreement to initially place them in Coast Casino properties with a 45-day exclusive arrangement for off-Strip properties.

Kent Young, Aristocrat's director of marketing, said Coast Casinos is an ideal partner for Aristocrat because of the compatibility of the more mature customer bases of frequent players.

Aristocrat's Millioni$er offers a $1 million payout on penny play, which operators are convinced will prove popular with players.

Young said half of the slots Aristocrat is shipping are 2-cent denomination machines or smaller and 80 percent of the company's portfolio is available in smaller denomination machines.

He said 90 percent of the installed machines in some Australian markets are small-denomination slots, and he expects to see the trend accelerate in the United States.

Young said the advent of ticket-in, ticket-out machines makes penny slots technologically feasible and economically efficient for operators.

Connie Fox, spokeswoman for Reno-based International Game Technology, the world's largest manufacturer of slot machines, said, "We know that penny progressives is where the market is going which is why we put out the 'Beverly Hillbillies' a year ago and 'M*A*S*H' is a 2-cent game we recently launched."

Marcus Suan, vice president of slot marketing for Coast Casinos, said the return to penny slots would be impossible without ticket-in, ticket-out technology because of the challenges to customers and costs casinos would bear managing heavy coin volume.

Rob Stillwell, spokesman for Boyd Gaming Corp., said his company is seeing increased demand for small-denomination slots in all jurisdictions in which it operates casinos.

"As customers get used to (ticket-in ticket-out technology and low-denomination progressive slots), they discover they like the technology a lot, just as they liked ATMs and self-service at gas stations," he said.

Despite the name, players typically bet $1 to $1.50 per spin when they play on the multicoin, multiline video slots, up from the historical average of 50 cents to 75 cents per spin, Falcone said.

Only a few years ago, nickel slot players were shunned. Now, casino operators are actively marketing to these customers and devoting large sections of their casinos as "havens" for nickel and penny slot players, Falcone said.