A group of some of my gaming friends and I were sitting around a few weeks ago talking about how the gaming industry was going to grow from now into the future. After all, we’re just about at the limits of expansion, with Massachusetts well on the way to establishing its casino industry. The only areas left now are Texas and maybe Georgia or somewhere in the southeastern U.S. We’ve got the rest of the U.S. covered.
Of course, internationally, there are still growth opportunities. Asia is hanging out there like a plum, but the remaining regions available are going to be difficult to enter for major gaming companies. Japan is going to insist on local ownership, most likely. South Korea has already demonstrated that local ownership is important. Russia probably has room for growth, but you’ve got to have some brass ones to think you can compete there.
So with a minimal amount of expansion, one of the other ways to grow is consolidation. We’ve seen a fair share of that lately. Ameristar was bought recently by Pinnacle, which gives that company a strong position in the regional markets. But Pinnacle was forced by the government to sell some important properties to allow that sale to go through, strengthening those companies (Tropicana Entertainment, which purchased Lumiere Place in St. Louis, and the Golden Nugget/Landry’s, which bought the unfinished Lake Charles property) and increasing competition. Just last month, Eldorado, which operates properties in Reno and Louisiana, bought MTR Gaming, which owns casinos in West Virginia, Pennsylvania and Ohio.
On the supplier side, Bally Technologies gobbled up SHFL entertainment, bringing the largest table-game supplier under the wing of one of the largest slot machine manufacturers. Sci Games is just about to finalize its purchase of WMS Gaming. While both of those mergers were very synergistic, there are not many ways vendors can merge without actually losing value on one of the sides. It’s difficult to see how or why any slot manufacturers would merge. So consolidation is still a way to grow, but opportunities are few and far between.
We have the advent of online gaming just about upon us in the U.S. But what that has done for the most part is simply bring new companies into the industry, rather than grow existing companies. Our cover story this month, Ultimate Gaming, is an imperfect example of that because Station Casinos and the Fertitta brothers own a majority of the company, but it is still a new company with little connection to the past.
Other companies are hardly new to the online gaming industry. In New Jersey, which is supposed to launch its online gaming business next month, a stipulation that the industry be connected to the Atlantic City casinos has merely meant remote partnerships with established online gaming companies like bwin.party entertainment, 888, Gamesys, Betfair and others. While the AC casinos will get some of the revenue, it will be a decidedly smaller pile than their partners, and they will learn little of their partner’s expertise in most scenarios.
So while online gaming will grow the business overall, it will not grow the existing bricks-and-mortar companies very much.
And how will online gaming affect the land-based casinos? When you can gamble on your mobile device, why even travel to a casino? You’ll have the best games, virtually unlimited choices and even skill games that will be even more entertaining than today’s slot machines. So can you count on attracting players to your casino resorts largely for your non-gaming attractions? Who knows? The impact of online gaming on bricks-and-mortar is largely unknown right now.
I wish I had some wise conclusion to allay your concerns about the industry, how it will grow, and what changes should be coming down the road. But I don’t. Granted, the friends with whom I was discussing this were part of the “old school” and we know the past very well, but our knowledge of the new technology and the customers of the future is limited.
All I can offer is the promise that Global Gaming Business will be covering the cutting edge of the changes that will occur in the industry over the next several years. We’ll be like the canary in the coal mine. Keep an eye on this magazine and our attendant websites and apps, and you’ll better understand and predict the path to more growth and greater prosperity.