Will Donald Trump be good for gaming?
That question has been raised repeatedly in recent weeks. Usually, it has been raised by the general business press, with stories premised on the fact that Trump is a former casino owner, so gaming now has one of its own in power.
Others attempting to answer the question are equity analysts. They also have been positively biased, citing what they expect to be an investor and business-friendly administration.
Thus, it might have come as a bit of a shock when Attorney General Jeff Sessions suggested he might pull the rug out from under online gaming.
Specifically, Sessions opposed the decision by the Obama administration’s Department of Justice that the 1961 Wire Act only bans sports betting over telephone lines, and that he intends to review that decision.
It might be hard to put the online genie back in the bottle. After all, there are numerous congressional delegations representing states that now offer online gambling, including state lotteries. That is a political reality the Trump administration will have to face.
But Sessions might try to do it. And, even if he doesn’t, it shows that government risk continues for the gaming industry.
One of the fallacies underlying the general business press assumptions about Trump is that he’s a gaming guy.
Trump never really was a gaming guy, even though he owned several casinos. He was, and by temperament remains, a feisty, independent real estate developer.
Still, Trump has the support of Steve Wynn and Sheldon Adelson.
One suspects that if Trump leans towards an anti-gaming policy, he’ll get a phone call from one or both and will respect their viewpoints.
Of course, that might not help online gamers, with Adelson as the nation’s highest-profile opponent of internet gaming and Wynn biased against it. That’s where congressional delegations defending their states come in.
In speculating about Trump, there is one possible concern that isn’t mentioned—Macau.
If Trump alienates the national Chinese government, the boys in Beijing might decide to send the message to the compliant government of Macau that American billionaires, especially Trump allies, shouldn’t make so much money from Chinese gamblers.
And with casino concessions expiring in 2020 and 2022, the heat could be on.
Of course, bulls might dismiss that possibility. But, as we correctly warned in this space before, the Communist creed is anti-gambling, and Macau casino operators always are at risk. Those warnings proved true in recent years when the national government’s corruption campaign smashed the sky’s-the-limit illusions of casino investors.
For now, we don’t know how Trump will handle gaming issues, or issues that affect gaming.
We do know that the modern casino industry is influenced by the overall economy. Today, that economy is healthy. But there’s a caveat—the recovery is getting long in the tooth, and no one yet has repealed the business cycle. And that is a reality Trump will have to deal with, too.
Positive Hints For 2017
The year 2017 looks like it is starting out positive for casino and supplier companies.
On the supplier side, the Eilers-Fantini Quarterly Slot Survey shows both North American slot sales and leases gaining ground.
On the casino side, early reporters of December results were positive.
Wynn surprised with a strong report out of Macau as the new Wynn Palace grew the market and, given the company’s long history of slow ramping-up of new properties, suggests more good news to come.
Penn National likewise reported itself bullish about the new year, which could be a harbinger for other regional companies, such as Eldorado and Boyd.
Back to suppliers, the Eilers-Fantini survey shows that casino managers plan to replace 7.6 percent of the slot machines on their floor, in a continuation of a slight warming in the long-cold replacement cycle.
And the number of leased machines grew for the seventh straight quarter.
Both figures might be an indication that casinos are finally loosening purse strings after a long period of conservative spending coming out of the Great Recession.
Another trend worth noting is that the slot machine market continues to be more competitive, which is contrary to what many observers believed when IGT and Scientific Games completed their rounds of mergers.
In the past quarter, IGT still led, but only at 27 percent. A surging Aristocrat followed at 23 percent. Sci Games came in at 22 percent, and Konami 12 percent.
Smaller companies accounted for 16 percent of sales, including Everi, reporting a healthy 5 percent share.
Those numbers are a long way from the days when IGT had nearly 70 percent share and Bally, WMS and Aristocrat fought over the rest.
It should be noted that the Eilers-Fantini survey has a record of accuracy that is charted in the 55-page report. One reason for that accuracy is the sheer size of the participation—567 casinos globally operating more than a 506,000 machines, and casinos representing 37.5 percent of all North American slot machines.
(Note: The survey is available by contacting Robin Coventry at 302-730-2793 or at rcoventry@fantiniresearch.com.)
The bottom line is that conditions are improving for gaming equipment manufacturers, but competition is greater than ever.
