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Building for the Future

Konami's expansion in technology, geography and physical plant characterize aggressive programs

Building for the Future

Visitors to Las Vegas are often greeted by a view of the Konami Gaming building as they land at McCarran International Airport. The company logo is one of the most prominent on Sunset Road, which runs alongside the runways.

But as large as that sign and that building are, Konami has run out of space, and has broken ground on an expansion project that will more than double the size of the existing building. The need for more space is a direct result of the explosive growth the company has experienced over the past five years under the leadership of President and CEO Satoshi Sakamoto and Executive Vice President and COO Steve Sutherland.

The story of Konami is one of diligence, research and customer service, along with games that produce and systems that are today considered some of the finest in the business. Sutherland says the company’s core mission is to provide value.

“We will continue to offer a balance of products to the market,” he explains. “We engage in daily dialogue with our customers, and they are requesting a variety of acquisition options—sale, lease, and participation. One thing that remains consistent, however, is that Konami products provide a premium experience at a reasonable price. This is how we define value.”

Several years ago, Sutherland defined the goals of Konami as wanting to stand on the “podium” as one of the top three slot manufacturers. He says the company has worked diligently to achieve that goal.

“Over the last few years we have made excellent progress expanding our install base and placing innovative games on casino floors around the world. However, there’s still more work to be done,” he says. “We continue to have an excellent pipeline of products that perform at the top of their class and this will drive our growth, but we are not the type of company that will rest on past success. We must continue to push the envelope with products like Titan 360, the Podium Monument and the exciting new Rapid Revolver. We can further expand our reach into emerging markets and introduce our products to new players around the world.”

Sutherland acknowledges, however, that there are many other slot companies that have also upped their games as the technology leaps forward.

“The competition is getting stronger, and it just means that we have to raise our game and be that much better,” he says. “There are a number of new markets on the horizon both domestically and internationally that will help us place more units and drive higher ship share. With new product offerings like Podium Monument, SeleXion, Dragon’s Victory, the award-winning Dynamic 5 and Rapid Revolver, we will continue to grow our ship share in the markets in which we compete. We are also seeing success with new game themes on our KP3 platform, such as Solstice Celebration, Mystical Pharaoh and Dragon’s Law.”

Japanese Parent

Konami Gaming, Inc. is part of the multi-national Konami Group, with many other business interests, including video games, toys, trading cards, anime, pachislot machines for the Japanese market, fitness centers in Japan and more. The parent Konami Corporation was founded in 1969 as a jukebox rental/repair business, expanding to include arcade games in 1973. The company produced such popular games as Frogger, Scramble and Super Cobra. Today, the company continues to produce popular games for internet and mobile platforms.

In the gaming industry, Konami Gaming has risen steadily in market and ship share, and its recent products have turned heads.

“When Konami entered the gaming market, we did so realizing that our core competency is entertainment know-how and amusement technology,” says Sakamoto. “However, we didn’t have any experience with gaming regulations and customer trends, so we started with slot manufacture to familiarize ourselves with this industry and establish base R&D.”

Konami’s expansion project in Las Vegas will be able to satisfy all the elements of the company—manufacturing, research and development, and administration. Tom Jingoli, Konami’s chief compliance officer and senior vice president, says the building will build slots for at least half of the world, with a potential of producing up to 50,000 machines annually if necessary.

“We’ll be able to do all the manufacturing for North America, South America and Europe in this facility,” he says. “It will satisfy our growth needs for the next seven years or more.”

Although the original building was thought to be large enough for any growth, Sakamoto believes the expansion demonstrates the company’s commitment to the gaming industry.

“Our current building was designed in the very beginning for future extension to the adjoining land,” he says. “Fortunately our business grew faster than expected so we redesigned the facility not only for our original product, but for coping with the demand of both video and stepper slots.”

Jingoli says Sakamoto realized early on that the company would outgrow the current building, “so he told me to examine the purchase of the empty lot next door. So after negotiations with the owners, we bought the lot in late 2007.”

While the deal wasn’t the best fiscal decision the company made, the new building will make it all worthwhile.

“If this was a real estate investment, it would not have been a great deal,” Jingoli laughs. “We bought high and are now going to develop low. But it is an investment in the future of the company, so we’re excited about getting in there.”

The new building features 200,000 square feet of space (to go along with the 160,000 in the existing building). It is also an LEED Silver project, meaning it is sustainable and environmentally friendly.

“It will have geothermal heating and cooling,” Jingoli says. “We recently finished drilling the wells and got great results. It’s going to be a true state-of-the-art facility.”

Sakamoto says the expansion will provide Konami employees with the tools they need to succeed in a comfortable and sustainable environment.

“We always want to provide the best possible working conditions for our team members,” he says. “Although this is a huge manufacturing facility, it will be fully air conditioned to ensure the comfort of our employees during the hot summer months. Furthermore, we have been considering how we could make our factory more environmentally friendly. Using new construction technology, our design engineers provided the solutions to enable us to meet both objectives.”

Theme For Success

Konami games are very recognizable, and the R&D teams strive to produce creative and original themes that endure beyond a pop-culture 15 minutes of fame. Because of that dedication, Konami has been very careful in choosing outside licensing agreements.

“We have taken a deliberate and measured approach to licensed products,” explains Sutherland. “We have a very successful licensed brand in Rock Around the Clock and recently announced a partnership with Hasbro for developing a series of Dungeons & Dragons-themed products. Our philosophy is to develop games that are strong enough to stand on their own without the benefit of licensed themes, while evaluating licensing opportunities for the purposes of product diversification. We are unique in our disciplined approach, but our customers have rewarded us for our commitment to providing the highest quality products.”

Game formats are also a distinguishable feature for Konami games, with new cabinets and video displays that draw in the slot players. Podium Goliath, with dual 32-inch monitors, is an impressive device on the floor that has attracted much interest from casino customers.

“The response to the new Podium Goliath product has been very strong and it continues to deliver solid performance in the field,” Sutherland says. “While its oversized form factor is one that has historically been used by our competitors for novelty type products, the Podium Goliath is being used more like the original Podium. In fact, our customers are having success installing it in pods of three, and because we have made the entire KP3 game library available, with the original, successful math, the Podium Goliath is being played more like a traditional machine but with the added draw of the large-format monitors, seating and button panel. We will be showing some new dual-screen bonusing features like the Gigantic Wheel of Winning at G2E which will only bolster the Goliath’s success.”

“We also added the Dynamic 5 cabinet this year,” Sutherland continues. “This new cabinet, which won the Gaming & Technology award from Global Gaming Business for the most innovative new slot last year, is really a hybrid product because it leverages interactive, dual mechanical reels as well as a fully integrated video top box monitor. Our engineers have created an experience for players where they can engage with the primary reels, an exciting set of translucent outer reels, and a video monitor that becomes part of the overall game experience. Initially launched as a slant cabinet, we will be unveiling a new upright cabinet Dynamic 5 product at G2E, and it is already getting some strong interest from customers.”

The company’s Advantage Revolution traces its roots to the Konami R&D center in Japan.

“The Advantage Revolution is really one of the first products that included attributes taken directly from our amusement division in Asia,” says Sutherland. “As a result, the revolving center unit for the first time offered mechanical reels, a video display, and other entertaining bonus features. An initial hit when it was launched, we have continued to support this cabinet by developing new games with new math and new bonus features for our customers. At G2E this year, we will unveil new Advantage Revolution Rock Around the Clock titles including Rebel Without a Watch and Triple Clock Rocking as well as other exciting Revolution titles like Glittering Vegas and Chameleon Diamonds.”

Matt Reback, senior director of marketing, says the company’s “biggest” recent release was the Titan 360, a giant carousel with some unique features. The product debuted at Harrah’s Resort in Atlantic City in June and has been a “big” success.

“Titan 360 is a new large-format bonus game built above eight Konami video slot machines,” he explains. “Titan 360 uses Konami’s proven performing video titles with familiar game mechanics as base games. For an additional 20-credit wager per bet level, players are given the opportunity to enter the Rise to Wealth bonus when a lock symbol appears on reel 1 and a key symbol appears on reel 5.

“This unique bonus experience features a near-vertical mechanical spinning wheel with pockets, and a ball that is launched from one side and rocks back and forth until it lands in a pocket. If the ball lands in a red pocket, the values on the wheel increase for bigger rewards. This bonus event happens frequently and draws a crowd with everyone cheering for the big awards. The progressive awards scale, based upon the bet level for the player, provides the opportunity for players to enter the bonus regardless of their bet.”

 
System Centric

Konami approaches its system design in different ways than most slot manufacturers. Understanding that casino customers will do much more than play slot machines, Konami’s Synkros casino management system has flexibility for any size casino operation, as well as an ability to drill down deep into the customer experience.

“Our systems team is staffed with former property operators, and we reach out to customers to find out how we can help them drive their businesses,” says Sutherland. “We understand that when complex data is presented in a visual form, understanding and comprehension of that data is greatly enhanced. We realized that our customers would like to ‘see’ their data in order to generate insights, which allow them to make critical business decisions quickly. Our mobile and dashboard offerings will provide every level of management with personalized KPIs displayed on mobile devices in order to help them drive their business forward.”

A new addition to Synkros is an instant tournament module, True-Time Tournaments, that enables casino operators to add excitement to the casino floor at any time.

“Player-On-Demand tournaments provide casino operators with the ability to award tournament entries as incentive rewards,” he explains. “The benefits of on-demand tournaments are twofold. First, operators love it because it eliminates the hassles and costs associated with setting up traditional, roped-off tournaments—it’s fully automated, and other than setting up the program, it’s largely labor-free.

“Second, players love it because they get to play their tournament when they want—no more lines, and it’s on their own schedule. With some additional system hardware, any touch-screen video machine can become a tournament game using True-Time Tournaments.”

Maybe the most attractive element of Synkros is the ability to track non-gaming spend across the entire enterprise.

“The benefits of tracking non-gaming spend for casino operators are clear when one considers the true value of a loyalty program,” says Sutherland. “For resort guests, any spend, regardless of whether it involves gaming or non-gaming activities, should be tied into their loyalty program, because every dollar spent should equate to value at some determined margin for the property. Over the past year, we have been enhancing this functionality to ensure that the casino operator is able to accurately see and calculate more specific data from gaming and non-gaming points of sale. Accurate guest valuation can result in more effective reinvestment programs, which drive top- and bottom-line growth.”

R&D continues to be an important part of any slot company, and Sakamoto says the addition of the large Vegas facility will complement other Konami studios around the world.

“We have a great R&D team in Japan,” he says. “Our teams work collectively across our R&D locations in the U.S., Australia and Japan. Each center has its own core strengths and expertise. It may be that our Las Vegas center is big, but it does not necessarily follow that big ideas or high technology only come from a big facility. It is the people surrounding the technology and entertainment that make the difference.”

Sakamoto believes increased gaming R&D in Japan will pay benefits to the company.

“I have recently shifted teams from Konami’s amusement and pachislot departments into the gaming division to increase the capacity of R&D in Japan. Moving forward, this team will support our Australian R&D as their work gradually comes through. The Japanese pachinko and pachislot market is mature, and with a long history. Pachislot is especially popular with the younger generation. There are lots of experienced game designers in Japan with the potential to move into gaming. They will require a little bit of time to gain knowledge of the gaming market and its regulations. These designers will be in a position to contribute to the Australian operation shortly.”

Much attention has been devoted to online gaming, and Sutherland says those efforts have begun to bear fruit.

“We have spent a significant amount of effort evaluating this space and the optimal way to enter this segment of the industry,” he says. “We understand this environment is fluid and we want to ensure that our strategy doesn’t adversely impact that of our customers. We are a partner to our customers, and we are looking to augment our relationships with them through offerings in the i-gaming space. We have now moved beyond the evaluation phase of this sector and have begun putting the right resources in place to further refine and execute on our strategy based on the evolving market conditions.”

Sakamoto cautions, however, that Konami’s main concern is the well-being of its current customers.

“Slot machine products differ significantly from the online gaming segment,” he says. “Customers need to come to a casino to be entertained and experience these products.”

International Expansion

While the primary market for Konami Gaming remains North America, the company is aggressively eyeing other regions of the world for growth opportunities.

“Our strongest market remains North America,” says Sutherland. “However, we are gaining momentum in a number of international markets including Asia and South America. We have also recently engaged additional business partners in Europe to help us distribute our product and gain broader penetration. We have recently opened an office in Singapore, which serves the growing Asian markets of Singapore and Macau. We see these markets as having tremendous growth potential for Konami over the next several years.

“We have aggressive goals to grow the size of this company and we are investing in key resources in order to ensure that we are successful. Our growth will occur domestically here in the U.S., but we also expect to see continued growth in Latin America, the Caribbean, Asia and Europe.”

Sakamoto believes an increased concentration on the Australia-New Zealand market will help grow market share there.

“In recent years, competitors have increased in the Australian market,” he says. “Unfortunately, our market share has been down for the past three or four years. We had previously shifted R&D support from Japan to the U.S. and other markets. During that time, the demographics have changed in Australia, and the Australian market now requires more Asian themes.

“As a leader with focus on the Australian and Asian markets, I have no doubt we will recover and gradually increase market share.”

And what would the possible legalization of gaming in its home country mean to Konami?

“There are indications that the Japanese market has potential,” says Sakamoto. “There are 4.5 million pachinko and pachislot machines across Japan. According to a recent magazine article, net income (the same level as casino net income) from the pachinko and pachislot industries is about $30 billion. It is one of the largest markets, even in comparison with existing casino markets.

“When you look at the current industry situation, American manufacturers are leading the U.S. market, and Australian companies are leading the Australian market, so why not have a Japanese company leading in the Japanese market?”

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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