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Coming To America

In Search Of The World's Largest Gaming Market

America.

It’s not only been the dream of millions of our own immigrant forefathers. It’s also been the vision of companies in other countries to enter the U.S. gaming market. Although the current state of the economy both here and abroad may have dimmed that ambition, it is still a market that tempts foreign-based executives worldwide.

From near and far beyond U.S. shores, companies have aspired to cross into a land they envision as a vast vista of gaming opportunities. It’s not difficult to understand the lure of the U.S., which accounts for more than 50 percent of the world’s casino action at a value nearing $60 billion in revenues, and which exceeds 750,000 slot and video poker machines and thousands of table games, according to various reports.

Enticing large and small companies based in other parts of the world is a U.S. market that continues to transform from the large destinations of Las Vegas and Atlantic City to hundreds of gaming venues close enough to drive to by most adults. At present, there are slot operations in 37 of the 50 states, up from 31 in 2000.

Leading the attraction of the U.S. has been the explosion of gaming growth in the Native American market, which had its start only in 1988 and now reportedly generates more than $25 billion in gaming action. According to the National Indian Gaming Association, there are 423 Indian gambling operations in the country, operated by 225 tribes in 28 states. This includes scores of smaller bingo halls in addition to the largest of destination casinos with thousands of slot machines.

For all but the past year or so, Native American gaming has boasted double-digit growth from one year to the next. Even in today’s economy, this segment continues to outperform most other markets, including the largest state market of Nevada.

Nevada, the first state to legalize gaming, still lays claim to more than 340 gaming locations with more than 170,000 gaming machines and nearly 6,000 table games. Although in the current recessionary market, Nevada’s revenues were $11.2 billion (down 11 percent for the 12 months ending in February 2009), that’s still larger than most other gaming markets in the world.

Even if the economy continues to constrain casino visits and overall revenues, a different longer-term effect is occurring within the overall gaming market that will maintain a focus on entering the U.S.

As has been the case in other financial downturns, this current economic situation is driving newfound or renewed interest in extending gaming into new markets. From coast to coast, cash-strapped states and communities are pushed to look for ways to balance budgets from taxes on new or expansioned gaming venues and games. Keen interest or actual legislation for new or expanded gaming has been reported in Florida, Maryland, New Hampshire, New York, Ohio, Pennsylvania and Texas, to name a few.

In all, we easily see that the U.S. gaming market will continue as a strong magnet for those from other parts of the globe, as it has since early on.

Opportunity Knocking

Everywhere immigrants have enriched and strengthened the fabric of American life.
 —John F. Kennedy

In much the same way as Kennedy noted of immigrants, we have seen how companies from other areas of the world and their technologies also have enriched and strengthened the U.S. casino market.

An example of this can be traced to one of the first to enter the U.S. market, Australia’s Aristocrat. According to company history, Aristocrat launched its first machine in the United States way back in 1964, just prior to opening its first overseas sales office in Reno, Nevada.

Although it would take some time, the company would make its mark as the creator of what would become known as “Australian-style” slot machines. These slots would energize the casino floor in the U.S. with video slot machines featuring multiple pay lines, with more bonus games than previous slot games. The company also would be among the first to introduce a full library of penny games, and in doing so, would go on to capture a sizeable share of the U.S. market.

Another successful pioneer in the U.S. gaming market was JCM. Its corporate history dates back to the mid-1950s, when its Japanese parent company was founded as Japan Cash Machine Inc., Ltd, with a vision of developing currency solutions. In 1988, JCM American began operating in the United States, first incorporating in New Jersey. It soon changed the face of the industry when it introduced the first-ever side-mounted bill validators for gaming devices. Today, it’s hard to imagine the industry functioning without bill validators.

In much the same way, other companies are bringing their visions and technology to the U.S. gaming industry. Today, the Association of Gaming Equipment Manufacturers, which began as an organization of U.S. gaming suppliers from its Las Vegas base, lists a growing number of members from outside U.S. borders. At last count, more than 20 percent of the current AGEM companies can trace their start or headquarters to other continents, and all are actively pursuing the U.S. as a land full of opportunity.

More Than Just Knowing The Lingo
Although each company has its own road to success in the U.S. gaming market, there are important steps to take, and equally, missteps to avoid in taking on this challenge.

For those who have been on the inside when a company enters a new U.S. market, it’s more than just a matter of knowing the language or adhering to a simple “think globally, act locally” process. Euphemistically, the American phrase that best describes what it takes is that you have to know not only “Where is city hall?,” but “Where is the mayor’s office?”

There is much to be learned from just some of the trials and tribulations of the companies that have been here and, unfortunately, have not done that initially.

Go Ahead, Blame The Messenger
Without doubt, one of the first stumbling blocks observed with several non-U.S. companies starting out here is their over-reliance on a plan that depends primarily on continuing to do what works in their home market, or other successful markets, and assuming it will work in the U.S.

Part of this is understandable—you go with what you know—and some of this can also be seen as the familiar “us against them” mentality of being in a new place where you have not had the opportunity to develop and trust new relationships.

Unfortunately, though, many times the blame for any initial non-response to the product line is heaped on the messengers, which can even be the unlucky company counterparts now living in the U.S., as well as their local advisers.

In the end, we find that the companies and products do succeed, but rarely without eventually either some re-engineering and re-direction, or major efforts to educate and market to a U.S. audience—or more likely, both.

Plan “B” Often Succeeds
For many companies, the original plan fails to deliver results for months—and even longer—before those in charge make a connection to what the market is saying and switch to an alternate plan. In this new plan, they will navigate a new path that adapts to the differences and unique challenges presented by a diverse and, often, less-than-welcoming marketplace.

The companies and their executives—many times only with outside expertise—begin to see the multitude of differences and distinctions within the overall U.S. market (land vs. riverboats vs. Native American) and segments within markets (tourist vs. locals). Add in differences within the segments (“hip” vs. “mainstream”—or “innovator” vs. “follower”).

In the end, the challenge of the U.S. market is best determined by what opportunity to tap, when, where and how. Only then does this become the land of opportunity for companies from all parts of the world.

Successful Entry
To outline a route to successfully enter the U.S. market in the following few steps is venturing to describe a path through very complex terrain using the most general of compass readings. This stripped-down course of action attempts to point only in the right general direction.

Being ‘Accepted’
The U.S. gaming market does not throw wide its arms to welcome newcomers. Barriers to entry, especially regulatory constraints, do make it tough for new competitors to break into this market.

To start, the product, even if successful in other, multiple markets, must be made suitable for the American market and its American audience. All the various markets or sub-markets and audiences, from buyers to players, have their own unique sets of standards and resistance to change.

Determining if a product is—or can be made—“localized” initially requires a review of the regulatory and licensing requirements, which vary not only by market and segment but many times by individual venue or casino. For example, even what’s allowed in one Native American casino may not be acceptable to another tribal venue or in a different state.

Beyond the approval process required for each individual product, many non-U.S. entities are surprised to learn the extent to which the companies themselves and individual staff must conform to a complex process of licensing and legal regulations to fully participate in our gaming environments.    Executives, especially the top and “C” level staff, will be subjected to scrutiny that has been known to offend the sensibilities of many foreigners.

Moreover, all business deals with U.S. customers also will need to adhere to the general terms and arrangements that are common practices here, but not easily embraced by those from other countries. These include free trials and other special sales and marketing required to launch a product offering. In addition, corporate ownership of casinos presents its own set of what it takes to succeed.

Almost too many other factors to list enter into the acceptance equation. For example, the “turnover” of games can be much shorter than what’s seen in other markets. As a result, a company will need to understand what pipeline of new games and products will be required—not only to get a chance to get into a casino, but to remain on the floor.    

Foreign companies also have introduced products that initially are just not what U.S. casinos or players are accustomed to nor have the inclination to want to understand. As result, it is just as important for the products themselves to be straightforward to understand.

On the flip side—and making this all the more difficult—is that at the same time, the products must display key differentiation and offer new or unique features to plaers and operators.

Over the years, foreign companies also have introduced remarkable innovations for the U.S. gaming market, which makes the stumbling blocks even more difficult. Players and intermediaries will need to be educated, most likely through intensive marketing. In this case, the innovators will need even more stamina and patience to endure what it will take to make this new-to-the-market product succeed. (Just ask someone who was with Cyberview Technology to explain what it took to take server-based gaming from an interesting concept into what casinos are planning for now.)

To compete here, as elsewhere, takes a realistic assessment of the complete offering from the customers’ viewpoint—and the ability to benchmark its ranking against the needs of a U.S. casino operator or player and what’s currently available.

Tapping into the right expertise to wheel your way through the entire
maze is probably best done in conjunction with the next step—having the right partner.

Howdy, Partner
That’s a uniquely American expression, and our way of underscoring how essential it is to have a local associate on hand who fully understands the U.S. gaming market and culture. This strategic resource will be called upon to show varied skills and talents in ushering a company through the entire process of critical business dealings and negotiations.

Depending on the need, this person functions as ambassador, guide, comrade in arms, chief confidante and experienced pilot who can fly solo when needed. It’s who to call when a key introduction is needed, and it’s who opens doors—even back doors. Look for experts who have experience in bringing foreign products to the U.S., and equally important, who already may be licensed.

The input of these advisers commences with crucial assistance in analyzing the various market entry options. For example, is the Native American market your easiest entry? If so, is your best option the large California market, the changing Florida segment or growing Oklahoma casinos?

In addition, this local partner will be of essential importance in keeping track of a changing market environment and be your lookout to avoid any conflicts with laws, trade, investment or taxes. His or her input will be critical in securing other local gaming authorities and experts as needed from time to time, for compliance and licensing or technical support.

You also should be able to look to your expert advisers to suggest what local support and staffing is needed even before any sales are being considered.

Not Lost In Translation
Simply stated, people won’t buy what they don’t
understand, and this is where your marketing makes
its mark.

On one hand, this does become the basic matter of translating materials into standard U.S. English. (Don’t spell it colour, because here, it’s color.) But that’s merely the proverbial tip of the iceberg involved in what’s meant by “translation.”

Research underscores how much can be lost or gained in true translation. Using actual business documents, studies have demonstrated that business buyers will not give full consideration to a product unless the company provides localized marketing materials that they can read and understand to the fullest. In real terms, products without properly translated materials stand a less than one-in-five chance of making it to the short list.

Of course, there is more to translation than easy-to-read English. It is the ability to interpret and render the true features and benefits of the offering in terms that are meaningful to a new U.S. audience. Here as in other markets, your company and product will need to overcome a wall of indifference and an all-too-typical reaction that “just because it works (name anywhere else) doesn’t mean anything to me.”

The right U.S. marketing experts will have the insight and input needed to recommend what it will take to “brand” your company within the U.S. market. Local experience and expertise should be tapped to ensure your worldwide brand resonates with the needs and requirements of the U.S. marketplace.

Through key connections and relationships with trade organizations, media and customers, your U.S.-based marketing consultants will assist in many facets of the plan, from helping identify potential prospects to generating overall interest in the company and its products.

Importantly, the local marketing experts should be experienced in working with corporate departments and have a keen understanding of how to become a seamless part of the overall marketing effort.

Roadmap
To truly succeed in the U.S. market, close monitoring and adjusting will be needed as the product moves from initial interest to seeking trial sites to actual rollout and ongoing installations. Product performance and market acceptance will need continual assessment.

These steps should ensure that the foundation for longer-term success is being built along with the introductory plans. Understanding the steps also should take some of the risk out of the equation, both in terms of time and resources, and ensure that realistic business targets are established and achieved. In the final measure, it gets the right product to the U.S. market quicker and hopefully inspires a higher level of confidence.

Roy Student is a longtime gaming and hospitality executive who currently utilizes his key expertise and experience as a sought-after consultant and speaker to the international casino and gaming industry from his base in Las Vegas. He has been the force behind the successful U.S. market entry for companies coming from Asia, Europe and South America. Student can be contacted at srsgsi@yahoo.com.

A marketing veteran also based in Las Vegas, Carolan Pepin has been working with companies from beyond the U.S. since her introduction to international business in Chicago with the Japanese conglomerate Panasonic. After being recruited to the gaming industry in 1996, Pepin worked for Aristocrat, Sigma Game and Cyberview Technology. Most recently, she has focused on helping an East European gaming manufacturer with its expansion into the American markets. Pepin can be reached via pepinmarketing@aol.com.

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