GGB is committed to providing updated news and analysis on our weekly news site, GGBNews.com.

Cashing In

Having assembled the top development, management and engineering talent in the business, Aristocrat is reaping the benefits of its own reinvention

Cashing In

The past few years have given a wild ride to the industry’s slot-manufacturing sector. The top four slot-makers became the top three—two of those three having merged to form huge, end-to-end casino and lottery suppliers.

And then there was Aristocrat.

Australia’s Aristocrat Leisure Ltd., the world’s second-oldest producer of slot machines, was not playing the consolidation game. Yes, the company did add highly regarded Tennessee-based Class II supplier Video Gaming Technologies, but that move was more expansion than consolidation, giving Aristocrat a popular product category it never had previously.

The plain fact is, while its top rivals were looking outside to grow and diversify their businesses, Aristocrat Leisure and its U.S.-based subsidiary Aristocrat Technologies were strengthening their ability to compete against any and all slot manufacturers—huge or otherwise.

Not that the company was in serious need of revamping at any point. While struggling along with all the other slot-makers in the so-called Great Recession, this was, after all, a manufacturer that produced its first slot machine in 1953, and dominated the market in its home Australia long before exploding on the U.S. casino scene in the 1990s, when it created an entirely new gaming category of low-denomination, high-payline games.

The company has always been well-equipped to weather economic downturns. In fact, as the most recent recession heightened, Aristocrat CEO Jamie Odell was already positioning the company for its next era.

It was not just the economic downturn that prompted the change. Aristocrat had seen glory days immediately after securing its Nevada license in 2000. For half a decade, the company launched innovation after innovation—the Reel Power “ways-to-pay” reel setup, Mr. Cashman mystery-style progressives—that subsequently became part of the slot culture, for all manufacturers.

Later in the decade, as competitors chimed in with special features to match those of Aristocrat, results flattened, prompting Odell to re-examine the company’s entire product offering against what else was in the market. In 2009, he announced a five-year turnaround plan that would transform the company’s fortunes.

There would be a focus on North America, and on increasing recurring revenue through gaming operations. Aristocrat had  built its traditional fan base on its own in-house brands and signature game style, eschewing expensive licensed entertainment brands. Odell now wanted a piece of the leased-game revenue on which competitors like IGT thrived.

What the industry witnessed in the ensuing five years was nothing less than the reinvention of Aristocrat. The company that was built on its own home-grown brands began tapping the world of entertainment, and even popular literature, in search of recurring revenue. JAWS. Mission: Impossible. Tarzan: Lord of the Jungle. Zorro. Superman the Movie.

Before long, Aristocrat ramped up the effort with a landmark game based on the most popular cable TV series in the U.S., The Walking Dead. The game clearly was on, with one of the biggest hits in the slot-maker’s long history.

One of the things making Aristocrat’s revival unique was that its new embrace of licensed, recurring-revenue titles did not displace its old game philosophy; it augmented it. The new focus on gaming operations was accompanied by a refocus on the classic Aristocrat game style, the one that made the company king of the pokies. The company launched the “Legends” series of games, which celebrated the most popular of the company’s classic multi-line titles.

Those titles, like Buffalo and Pompeii, were still receiving heavy play in the original versions. Aristocrat placed them in dual-game machines, giving players a choice between the originals, in all their 1990s splendor, and a modern version with all the 21st century graphic bells and whistles. (Almost all picked the new versions.)

With the company’s scope of slot product larger, Aristocrat executives decided to go after the best available talent to execute their vision. Competitors watched as the company became the New York Yankees of game-makers. Joe Kaminkow, the longtime IGT game whiz, was brought in to create licensed games. Scott Olive, the man behind the groundbreaking Hyperlink progressive product of the early 2000s, was brought back. Dan Marks, the creative force behind High 5 Games, was brought in for entertainment-based games.

Along with proven designers like Ted Hase (the man behind The Walking Dead), Nicholas Bennett and others, the augmented group formed a collection of individual teams in a new studio system that would crank out games in each of a formidable number of categories.

“We’ve got a great set of studio heads, and great people who work for them,” says Odell. “We’ve really tried to build a working environment which allows creative people to focus on great game content, and we do that in a way which works best for their style.”

While producers of the games have added “enormous value to the company,” Odell says their addition is part of an overall plan “to be a creative company, to be an ideas company, and to provide a culture and an environment where they really feel that they can be their best. And I’m absolutely delighted with the output of that group—the quality, but also the variety.

“That’s really, really important to our customers these days, as we’re trying to appeal to all aspects of demographics in all markets, all corners of the floor.”

The last two Global Gaming Expo shows have been a dazzling coming-out party for the new-and-improved Aristocrat. In gaming operations, titles like Batman Classic TV Series, The Rolling Stones and Britney Spears from Kaminkow have been joined by Sons of Anarchy by Hase (the biker show’s producers reportedly asked Hase to design the Anarchy game after seeing The Walking Dead) and other new games to be revealed next month.

The new high-profile brands are accompanied by new versions of Aristocrat classics, from Buffalo to Mr. Cashman, and new cabinets and game presentations like the Vervehd, the Feature Top Box, the theatrical Wonder Wheels, the immersive Arc and, most recently, the new core cabinet Helix with its floating LED displays.

Awe-inspiring trade show displays are not the only result of Odell’s successful five-year plan. Aristocrat is at the top of its game financially as well. The company more than doubled its EBITDA and nearly doubled cash flow for the first half of 2015, increasing revenue by an astounding 75 percent year-on-year.

Delivering the Product

Having transformed the company into a powerful new force in the market, Odell says his focus for the past year has been on delivering the new wealth of product to the worldwide market.

“We’ve had a great half,” says Odell, “as we have really focused a lot on our operational delivery. We have great growth in our home market of Australia, where our product is really engaging our customers.

“We’re seeing strong performance in our social digital business based out of San Francisco and London, and great growth in North America as well, in the Class III premium gaming operations segment, where we continue to see our floor installed base grow, and good EBITDA and good value for our customers.”

Odell says it’s all the culmination of the company’s efforts over the past few years. “I’m delighted that it’s delivering value for both our customers and for our shareholders,” he says.

This year, that value comes in the form not only of new games, but in new formats that give the company’s designer dream team a palette matched by few other manufacturers. Games like Britney Spears show off the grandeur of the Arc Double cabinet, with two 42-inch curved LCDs forming a mesmerizing display. Then there’s the Behemoth, a massive 10-foot cabinet housing an 84-inch LCD, a record in the Big Bertha space that is being launched with a super-sized Buffalo Stampede.

“Those cabinets are for premium games, and allow us a different platform for our game designers to work upon,” Odell says, “different perspectives and different forms of games. They’re also resonating, and they particularly play out well, with the licensed content that we’ve been acquiring.”

It culminates this year with the Helix, which Odell calls Aristocrat’s “core cabinet globally.” With widespread distribution both in North America and other worldwide markets, the cabinet is gaining momentum with operators. “It’s really driven by very powerful technology, which allows us to have high-quality graphics and animation and better sound,” he says.

He says the best part is that Aristocrat content on the Helix is significantly outperforming the exact same content on the previous generation of cabinets. “It’s great to be in that position,” Odell says. “That’s the core engine of our global cabinet.”

Meanwhile, the content on those cabinets continues to gain followers. Aristocrat’s Buffalo Stampede and other titles consistently top the quarterly gaming survey of Goldman Sachs as the highest-earning games in the business.

Moreover, Aristocrat’s newer games are gaining popularity worldwide, notes Maureen Sweeny, Aristocrat’s chief commercial officer. “We’ve released many of our licensed themed games here in the U.S.,” she says, “but just recently, for example, we’ve launched Wonder Wheels with Batman in Europe, in several casinos. And we plan to take that to Asia.”

The VGT Connection

With all the technology at Aristocrat’s disposal and the games’ popularity around the world, a few years ago, one would have been hard-pressed to identify any areas of machine gaming that were underserved by the company. Odell could.

While competitors like IGT, Bally and Multimedia Games all sold thousands of Class II versions of their games to Native American markets like Oklahoma, California and Wyoming, Aristocrat had never ventured into the electronic bingo space. So, when the opportunity arose to buy VGT, Aristocrat gladly shelled out $1.3 billion to acquire the Class II supplier in a deal that closed in October 2014.

Odell says the addition of those Class II recurring revenues from Oklahoma and other VGT strongholds immediately improved Aristocrat’s cash flow, and has been a big part of its surging revenues this year.

 “We’ve clearly had a highly important and transformational acquisition with VGT, which is a fantastic business,” Odell says. “They have really great content, really great people, and we’re delighted at how that business has started up with us.”

Odell adds that VGT’s content complements that of Aristocrat. “It really is a great content business,” he says. “In terms of integration, we’ve been looking at areas we can cooperate, we can add value. One of those is a wide-area progressive that Aristocrat Technology has put on top of the VGT games, and in fact, those are being launched now.

“It’s a great example of adding value and driving revenue… We’ve got a great leader down there, (VGT President) Jay

Sevigny, and Jay was previously with the business, so he knows the customers and staff very well. It’s overall a fantastic leadership team, and it’s been growing strongly and very steadily.”

Aristocrat has taken the initial approach to simply encourage the Tennessee-based company to do what it has always done well. “(VGT) hasn’t missed a beat since we took it over, and I couldn’t be more pleased with how that partnership is going,” says Odell, “and how well the VGT team is working with the legacy team at Aristocrat, in terms of looking at customers’ needs, and working the solutions for all customers, across systems, Class III and Class II.”

 VGT’s inherent strength is also the reason there hasn’t been a rush to have the now-subsidiary produce Class II versions of Aristocrat classics. However, Odell concedes it will happen at some point. “What we acquired with VGT was a very strong Class II mechanical reel business,” Odell says. “And what Aristocrat is, at core, is a very strong Class III video business. So, you can easily do the crossover, and think about, ‘How could we get video content into mechanical reel,’ and vice versa, using the strong platforms that we have in both businesses?”

System Strength

Another necessary strength of a Class II supplier like VGT also dovetails nicely with that of Aristocrat—the systems space.

Aristocrat’s systems business is centered around the popular Oasis 360 system solution, strengthened with Oasis Halo, a suite of software dedicated to developing customer loyalty solutions across an entire enterprise.

Sweeny notes that Oasis Halo is designed to reach outside of a casino’s established player base, and outside of the casino games themselves, to build customer loyalty and retention.

“Too often, non-carded players slip through the cracks, whether they are gamers or non-gamers,” Sweeny says, “but they also are contributing to the casino’s bottom line in some fashion. Our Halo offering was built to be an enterprise solution, for both the Oasis system and other non-Oasis system operators, to be able to use throughout their operation.

“It is a system to identify and reward players and other types of customers, enabling them to build loyalty to the property’s experience. Our mobile concierge application has been launched, allowing our properties to extend the experience beyond the casino’s four walls, also delivering strategic event-driven marketing messages that further build the operator’s brand.”

Development in the systems space ties in with Aristocrat’s online offerings, and in particular its development in the social gaming space. The nLive social casino boasts the largest footprint of free-play sites in North America.

Aristocrat’s nLive free play site allows casino websites to offer branded virtual casinos including the most popular Aristocrat titles. Its latest implementation by the Desert Diamond casinos in Arizona is the first time nLive has been incorporated with a non-Aristocrat casino management system.

In the real-money iGaming space, Aristocrat recently added its content to sites in New Jersey and Delaware in the U.S., continuing a practice it had honed in European markets. Odell says they are performing well.

The online and social areas get a new boost in January, when Pat Ramsey, former CEO of Multimedia Games, takes over as chief digital officer. Ramsey built Multimedia into a Class III powerhouse, and left with its takeover by Global Cash Access.

He will oversee the movement of Aristocrat content to new digital channels, an effort that has already begun as Aristocrat is partnering with Taiwan-based International Game Systems on a mobile app to place FA FA FA slots on iOS and Android.

“Pat will take over responsibility for driving that entire thinking for us,” says Odell. “We’re focused in that marketplace, there’s plenty going on, and certainly we have the capabilities that we need, and Pat will help us to grow those capabilities further.”

Moving Forward

The digital capabilities will help Aristocrat as the company moves forward in a changing casino industry. The company’s strides in North America have combined with a still-solid leadership position in the Asia-Pacific region, where, in addition to its home-base leadership in Australia, Aristocrat has always been one of the leaders in Macau and other Southeast Asian markets.

Despite the ongoing sluggishness of the Macau market, Sweeny comments that the pending openings on the Cotai Strip promise to keep business brisk for the supplier.

“We’re pleased to have achieved strong sales in the new Cotai opening, and we certainly believe we can continue to hold market-leading share across the entire Asia-Pac region,” Sweeny says. “That said, we never take anything for granted, and we are, of course, acutely aware that Macau is an important market—but it is not the whole region.

“Asia-Pacific, overall, encompasses a range of unique markets, and our approach is to tailor our products and approach, and work hard to offer the most compelling portfolio with each and every market.”

The decline of the VIP market and the rise of mass marketing in Southeast Asia actually works to the benefit of companies like Aristocrat, adds Odell. “As the market stabilizes with the new regulations, the mass market and the premium mass market are getting absolutely more focus from the operators,” he says, “and we’re working with those operators to try and establish a more sustainable, sizeable slot businesses, bearing in mind that market hasn’t really been slot-led since the outset.”

Moving forward, Aristocrat will continue its focus on gaming operations, new cabinets and game styles, and spreading its legacy content to new channels.

“Our success has been built on focus, discipline and certainly, willingness to invest in these key titles,” says Sweeny. “In terms of gaming operations, we drove focus early on by doubling our share of the U.S. gaming operations market over five years, and being clear that was our No. 1 strategic goal.”

Odell adds that while the company’s strategy does not depend on further mergers and acquisitions, the company’s executives keep the radar open for tuck-in deals that may make sense. “From my point of view,” he says, “we have a strong balance sheet, strong cash flows, and we’re always ready to be agile, but we must maintain our very rigorous approach to M&A. We have to make sure it adds value to our shareholders. And as we talked about earlier, we really like businesses which have strong content, strong player affinity, great people and good customer relationships.

“So, we’ll continue to look for those, but in the meantime, our focus is just on getting the value that we can out of our existing business.”

Odell adds that Aristocrat is working with its casino partners to develop the next generation of casino games, with skill elements and themes to appeal to the Gen X and millennial gamblers.

In the end, he says, it’s all about the content.

“At the heart of our strategy has always been great content,” says Odell, “and then we work out into which particular segment which content is required. In the U.S., we’ve been acquiring powerful licenses, really building great technology and great platform technology. We have great talent in our studios. But that’s also a similar story around the world, where we see a growth share, in our home markets of Australia, and even in markets like Macau.

“It’s been part of the journey we’ve been on the last few years, and at the heart of it has always been that ambition to deliver the industry’s leading game content.”

Frank Legato is editor of Global Gaming Business magazine. He has been writing on gaming topics since 1984, when he launched and served as editor of Casino Gaming magazine. Legato, a nationally recognized expert on slot machines, has served as editor and reporter for a variety of gaming publications, including Public Gaming, IGWB, Casino Journal, Casino Player, Strictly Slots and Atlantic City Insider. He has an B.A. in journalism and an M.A. in communications from Duquesne University in Pittsburgh, PA. He is the author of the books, How To Win Millions Playing Slot Machines... Or Lose Trying, and Atlantic City: In Living Color.  

    Recent Feature Articles

  • Back to Basics: 10 Trends for 2023

    The 10 Trends for 2023 do not start with the recovery from the pandemic

  • Doing the Math

    The creativity of game design goes hand in hand with what keeps players at the game—the program math

  • Everything to Everyone

    Bally’s Chairman Soo Kim aims for the top, but will technology be his foil?

  • Regulating the Regulators

    Should regulators of the multi-state, billion-dollar casino industry come from the outside?

  • Paying It Forward

    How payment technology has successfully met the challenges of today’s gaming industry