When I first started covering gaming (back in the Jurassic period of the industry), there were just two major slot companies, Bally Manufacturing and Universal. Oh, and there was a little upstart called International Game Technology, too.
Well, it wasn’t long before the “technology” side of IGT began to dominate and “little” IGT went on a run that was and is unprecedented in the slot manufacturing business, garnering in its heyday around 70 percent of the market.
So when GTECH announced in June it was buying IGT for more than $6 billion, there was one person I wanted to speak with to get his reaction: Chuck Mathewson, the former chairman of IGT.
Chuck was one of the first interviews of a slot executive I ever did, and I got to know him pretty well over the years. One time, I recall, I was headed to a meeting at the Rio in Las Vegas and I spotted Chuck wandering through the slots. I asked him if he was lost, and of course he wasn’t.
“I’m watching people play my games,” he told me. “Every time I do this, I learn something that the research never tells me.”
It was that kind of attention to detail that characterized the IGT that Chuck ran. And it hasn’t stopped. When he joined with “activist” investor Jason Ader last year to challenge IGT leadership, he was only looking to maximize value for the shareholders.
I asked him if he believed the GTECH deal did just that, and he agreed that it had. Synergies, he says. They work well.
I also asked him if he was floored by the magnitude of the deal, still the largest in the slot sector.
“It’s not bad,” he said, “but remember that IGT’s market cap was more than $13 billion at one time.”
Chuck told me that this acquisition almost happened the other way around a dozen years ago when IGT examined buying GTECH. Imagine if that had happened…
No need to imagine anymore. The “mega-deals” started with Bally Technologies buying SHFL entertainment, and Scientific Games buying WMS, and then gobbling up Bally last month. And when you throw in the blockbuster of Amaya buying PokerStars, we’re living in a different world, those of us who have anything to do with gaming equipment.
The convergence (talking about it and actually experiencing it are quite different) brings together all the wagering points in our society. Slots, tables, lotteries, online gaming… they are all coming together at an accelerating speed that makes it difficult to picture what the new world is going to look like.
The other players in the market are also gathering speed and acquisitions. Aristocrat buys Paltronics and VLC. JCM buys FutureLogic. Frank Fantini has some guesses of his own in the cover story on page 28. Gavin Isaacs, the man who touched many of these mega-deals, gives me his thoughts later in the feature.
But in the end, it’s all conjecture. Remember, even after scooping up WMS and Bally, Scientific Games’ slot portfolio still doesn’t equal the GTECH/IGT share. And what happens to all the other major and semi-major slot companies like Aristocrat, Konami, Aruze (Universal), Multimedia Games, Ainsworth, Novomatic and others? Will we see more consolidation? It seems that’s a given.
And how will all this impact the operators? Remember, there will be no slot purchases or iGaming advances without them. But they have their own troubles with flat revenues in most of the world and suddenly a blip in Macau, causing the Asian growth engine to falter.
And what of the lotteries? How do you reconcile the link with these state-owned betting machines when they were often the opponents of casino gaming, as late as last year when the big casino companies wanted to pass a federal bill legalizing (and regulating) iGaming? How is this marriage going to work?
Maybe we should resort to Chuck Mathewson’s old trick. Maybe we should all wander around a casino of our choice (even an online casino) and just observe the players. It all comes down to them, after all, doesn’t it? If we can’t deliver what they want, none of this is going to work. And if we don’t even know what they want, what are we doing? I know I’m going to be keeping my eyes wide open.