It was one of the most logical—and most talked-about—deals in recent gaming history. WMS Industries, parent of one of the top five slot manufacturers in the industry, would be acquired by Scientific Games, the global lottery giant.
This was not the snapping-up of a foundering company by a strong company. This was a merger of two industry giants.
WMS Gaming, the slot-manufacturing arm and main revenue-generator of WMS Industries, was on a roll at the time of last year’s big deal, with ship-share soaring thanks to launches of typically innovative new products like the Gamefield xD format and the new Blade cabinet and game format. Scientific Games practically invented the state-sponsored lottery industry as it is today, introducing the first instant ticket in 1974 and going on to become one of the main suppliers of the systems that run lotteries around the world.
The combination of the two companies creates an entirely different animal, with the strengths of each promising to take each former company into completely new areas.
“One of the things that struck us and excited us from our first glance at WMS was how complementary our businesses and capabilities are,” says Bill Huntley, group chief executive of gaming for Scientific Games. “This ranges from core technical capability to jurisdictional reach, to the type of customers we primarily serve. SG brings significant systems capability from our lottery, video gaming central management and control systems (CMCS) business and U.K. betting shop businesses.
“We have a global footprint of nearly 50 countries, and our customers are largely government agencies. WMS is one of the top gaming machine designers and manufacturers in the world.”
Huntley’s gaming division, which oversees WMS Gaming’s casino industry business, is one of three vertical groups within Scientific Games created by the merger. Gaming, Lottery and Interactive divisions each have their own chief executive, all reporting to corporate CEO David Kennedy. “This is a cleaner, more logical organization than we had before,” says Huntley. “It’s less confusing for our customers, allows each of us to be more focused on our particular gaming sector, and is more efficient and effective.”
In the end, the Scientific Games/WMS merger is clearly a case of the whole being greater than the sum of its parts. “We are now a bigger, stronger company with nearly $1.6 billion per year in revenue,” Huntley notes. “Collectively we have technical and operation centers all over the world. There are economies that come with scale, and they are not always measurable in financial performance, although we certainly expect to reap the benefits in this regard.”
“This merger creates new synergies and gives us a broader perspective on the industry, which pays off for our customers in a wider range of solutions and services,” adds Brooks Pierce, who, as chief revenue officer for gaming, oversees sales, marketing and gaming operations for the company. “We can and will leverage the separate and distinct core competencies of each organization to build a company that is uniquely equipped to respond to the market.”
One of the most important core competencies, of course, is the business of keeping WMS Gaming in the elite group of top slot manufacturers. Casino products like the “Wizard of Oz” and “Monopoly” franchises, core slot games like “Reel ‘Em In,” “Jackpot Party” and “Gold Fish,” and unique technologies like the Sensory Immersion Gaming series, the Player’s Life Web Services technology and groundbreaking cabinet styles have sustained the popularity of the company’s content.
Scientific Games’ plan is to use its own global presence to expand the best of WMS content to new markets across the globe. That means new game studios, expansion of marketing to places like Australia and Asia, and game design tailored to individual markets.
“I think most people in this business would say that WMS makes great games, and of course they do,” comments Huntley. “But they have largely taken a ‘one size fits all’ approach to content creation. This may sound critical, but it’s
really not. It was the right approach in the heyday of this industry and drove WMS to be one of the fastest-growing companies in the country by 2007.
“But the world has changed, including the gaming world. Traditional markets are peaking and new global markets are emerging. To meet the demands of this new reality, the ‘one size fits all’ approach will no longer work. Different world markets demand content that matches their cultures and the gaming preferences of their region.”
The solution? Keep doing what WMS does best, but tailor the innovations, themes and game features to each individual market.
“Since the transaction, we’ve been able to have a much more global perspective on the business,” says Phil Gelber, senior vice president of product development at WMS Gaming. “WMS was a very North American-focused company, where North America came first and the rest of the world was secondary. The biggest change now is that we’re looking at everything from a much more global perspective: how we can target these markets we’re not currently in, and how we can make content that’s catered toward those markets.”
Gelber says this will manifest in interesting new slot products in the coming year, “with a more international flavor coming from WMS than you’ve seen in the past.”
The game design regime is adapting to this new global reality as well. “We’ve grown a couple of new studios focused on those international markets,” Gelber says. “We’ve doubled the size of our Australian office over the last couple of months. We’ve also integrated the Scientific Games U.K. team, which is the old Barcrest team, and the Global Draw team in with the WMS game design team.”
U.K.-based Barcrest has been responsible for some of the most popular slots in the casino sector, games adapted for former partner IGT from AWP amusement games into hits like “Top Dollar.” The Global Draw, acquired by Scientific Games in 2006, provides server-based gaming terminals and digital gaming solutions to betting shops in the U.K.
“We’re thinking as one worldwide organization,” Gelber says. “We’re absorbing the whole Scientific Games perspective because they’re the expert in a lot of areas like the (betting systems) in the U.K. in which WMS didn’t really have expertise.”
Dean Ehrlich, senior vice president of global gaming operations for WMS, adds that the merger allows the slot-maker to provide its content globally, through a maximum number of channels and in a variety of venues, both land-based and digital.
“(Scientific Games) has done an excellent job of allowing our product development team to focus on the entire world with a more targeted global approach,” he says.
Pierce says the global approach will capitalize on what both companies brought to the merger table. “Scientific Games originally was focused on how to combine SG and WMS for maximum operating and financial efficiency, and that was how we modeled the transaction,” he explains. “As we completed our integration planning, it quickly became apparent that we had enormous potential revenue synergies. We have synthesized these into key initiatives that we are closely tracking and monitoring, and which we expect to generate significant revenue growth for us over the next few years.”
Part of that effort will be to capitalize on the relationships that have been built by each company over the years. For Scientific Games, that means spreading WMS content not only to global lottery markets—instant tickets and online lottery systems are already sampling the first WMS content—but to the parimutuel racing industry. (Scientific Games’ first merger, in 2000, was with Autotote Systems, a leading provider of race wagering systems. Autotote was sold to Sportech PLC in 2010.)
“Scientific Games has historically been in the lottery business and, until a couple of years ago, the racing systems technology business,” notes Pierce. “We know these people well, and have strong historical relationships with them. Many of those customers have diversified into gaming operations, so in that sense it has been easy.
“But it’s also clear that there were a number of key casino operators we did not know. Both Bill Huntley and I have been on the road quite a bit getting to meet some of these customers and have conversations about SG and our goals and aspirations for WMS. The feedback has been terrific. We sense a genuine enthusiasm as these customers recognize that we really want to keep and grow the innovation component of WMS, but also want to be laser-focused on our customers’ unique issues.”
Focus on Innovation
That “innovation component” has been a hallmark of WMS since former Chicago pinball king Williams produced its first slot machines in the 1990s. Intense competition in recent years caused the company to up its game, and over the past year, ship share has surged thanks to some groundbreaking new game styles.
On the heels of successful games like “Willy Wonka and the Chocolate Factory” and “Spider-Man”—in the Sensory Immersion 2.0 series incorporating the company’s “Motion Chair” for a virtual-reality slot experience—the company launched the Gamefield xD format, which places one 32-inch portrait monitor in front of the player horizontally—not unlike a pinball machine—with another 32-inch screen forming the vertical top box, to create a giant, interactive “game field” on which animation can extend seamlessly between top and bottom screens.
The format has brought movie-themed games like “Beetlejuice” and the latest in the blockbuster Wizard of Oz series alive, recreating scenes from the films to the delight of patrons.
Last year, the company introduced the Blade cabinet, a new format for core games, and the company had another hit. “Gamefield and Blade have been hugely successful,” says Allon Englman, senior vice president and chief design officer for WMS Gaming. “These cabinets were well-accepted by the players, and the content really works on these formats. They’ve been two of the more successful launches in the last year in the industry.”
As of press time, Blade was host to nearly 50 approved games, and the fifth game on Gamefield xD—a new version of “Clue,” based on the whodunit board game—was looking like the slot-maker’s newest success story.
The development of these products was the result of intense market research—the WMS team engaged players and operators for feedback at every step of the way. As a result, features were developed for the Blade cabinet that resulted directly from player and operator comments. “Wager Saver,” for instance, addresses an issue brought up by both operators and players—fractional amounts left on credit meters that result in cash-out tickets worth less than a minimum bet. Wager Saver allows the player to transform that 28 cents or 30 cents into one spin at the bet of the previous wager.
“Bonus Guarantee” eliminates bonuses in which the player wins nothing or next to nothing, making the player whole for 10 times the bet as a bonus award.
“We definitely listened to both the operators and the players coming up with these features,” says Gelber. “We showed a couple of new features this year at G2E to address some of the other concerns we’re hearing. We’ll continue to always listen and adapt as we go forward.”
“WMS was the pioneer of market research in the slot business,” says Englman. “We’ve been doing it longer than anyone else; I think we’ve got the best expertise out of anyone in the industry.
“And out of all the products we’ve ever done, Blade was the most researched. From hardware and software, all aspects were researched multiple times—not only pre-development, but in development and post-development. We’ve already made on-the-flight changes to the software based on in-market testing we’ve done with players.”
“Research is definitely part of our process,” says Gelber. “I’ve been at WMS 13 years, and when I walked in the door, that was the first thing that really helped me ramp up on this industry—talking to players. We’re constantly talking to players and operators, so as not to have our opinion be the only one going forward as we design these products.”
WMS has translated the Blade treatment to the stepper area as well, recently releasing the first three games on Blade Stepper 3RM (for three-reel mechanical). According to Englman, the first group of Blade Steppers targets the traditional high-denomination stepper player. He says the company focused on simplicity, traditional math and a very bright, colorful display, but also on including at least one feature in each game to spice up the classic reel-spinning experience.
For instance, a maximum five-coin bet on the game “Roll 7 Progressive” triggers a roll of dice after every winning combination, with a chance to win one of the progressive jackpots corresponding to each possible dice result. “AfterShock” adds a random element granting a series of free spins with guaranteed winners after random spins. “777 Wheel Hot” spins a wheel for an extra bonus after any “7” win.
Later this year, a series of low-denomination steppers on the Blade cabinet will be released.
“We wanted to keep things traditional on the 3RM games, to give players who like the simpler experience exactly what they wanted,” says Englman. “So, we focused on simple game mechanics and a visual hardware display that’s very bright and easy to see. It’s a very simple interface, but then, we managed to develop some interesting types of features in these launch games.”
Again, the strategy came from research. “We deal with the customers all the time, and they tell us their players want new high-denom games, but they aren’t getting anything new and interesting,” says Gelber. “At the same time, they want something that’s in their comfort zone, with a little something extra. Those are the games we designed at the launch, and as the platform evolves, you’ll see much more innovative game designs for that high-denom space.”
The new hardware platforms have been major hits for WMS, according to Ehrlich. “If you look at our ship share since we introduced Blade early in calendar 2013, the rise was very significant,” he says. “We’ve garnered significant traction from the Blade product. The performance was stellar out of the gate, and continues to be so. We also introduced our Gamefield cabinet in February 2013, and we’ve placed over 2,000 units. Those two platforms have been heavy hitters for us.”
New Players, New Markets
With the talent, the technology and the relationships that have merged to create the new Scientific Games and, by extension, the new WMS, the new powerhouse of the supply sector is well-positioned to both capitalize on and create the next generation of casino games.
For WMS, that also means catering to the next generation of players, as the company joins others in the slot sector in determining how to best serve the younger player demographic.
Englman says serving the 21-35-year-old player with new products means not only brands that appeal to them, but different play styles. “Taking a more modern spin on brands is one way to serve the (younger player),” he says. “Hardware is another.”
He offers Gamefield as an example. “Gamefield creates a new way to interact; isn’t just your grandmother’s old slot machine,” he says. “I think different kinds of game play that aren’t necessarily spinning reels, creating new game play styles, is what young people are interested in.”
“We continue to talk to those (younger) players, and look at brands that will appeal to those players,” adds Gelber. “Iron Man definitely falls into that non-traditional slot brand. But it’s also about game mechanics. They’re used to much more interactive experiences; they’re used to big 3D graphics playing Xbox growing up. Those are things we definitely can deliver.
“The big challenge is getting those players to sit down in front of slot machines, because slot machines are their dads’ game, not their game. The challenge is designing games that are literally outside the box of what spinning reels are, to get them to sit down and play those games and gamble on those games. That’s something we’re very focused on. I don’t think anyone has the turn-key solution to pull those players in, but as an industry, I think those are the players we need to focus on.”
Serving the future also means spreading content to the channels on which the younger demographic lives—mobile devices, social networks, the internet in general. (See page 32.)
“I think the slot machine will continue to be a relevant player gaming channel for many years to come,” says Huntley, “but it will have to evolve as part of the personalized relationship that many businesses provide their customers today. In order to reach the younger generations we must first go where they spend their time, and that is on their mobile smart phones.
“In some jurisdictions, this may mean playing directly on their mobile device. In all jurisdictions, it will mean devising ways to interact with them on their devices with social tie-in, escalating game play experiences that culminate on the casino floor and other incentives and introductions to an enjoyable and entertaining gaming environment that can be tailored to the likes of each and every potential player.”
For WMS, the Scientific Games connection means a smooth transition into more world markets in the near future.
“To give you one example, we recently issued a trade release on our new strategy for the Australian market,” says Pierce. “We are now selling direct instead of through a distributor, and have committed to an additional studio based in Sydney to develop games specifically for the Australian market. We are getting some early positive feedback, as it is a great regulated market and the customers there seem happy to see us fully engaged.
“We’re also excited about opportunities throughout the rest of the world. We are now selling direct in Peru with great results. We have a very big lottery-based business in China, and we feel that helps us understand the Asian player better, and we will be going after the Asia Pacific market aggressively with some new games that will appeal to that market. Last but not least, we see Europe starting to get some traction, and the results from the recent ICE show in London give us confidence that we will have lots of opportunities there as well.”
Huntley says the challenges and opportunities for WMS, and Scientific Games in general, are one and the same. “Our challenge is to draw on our broad range of products, skills and capabilities to meet the needs of a bigger and changing world of gaming,” he says. “Our opportunities lie in successfully meeting these challenges.”