Most slot manufacturers have reinvented themselves once or twice. For International Game Technology, the company that has led the sector for two decades, reinvention never seemed necessary in the past.
For most of the past 20 years, IGT has maintained a stranglehold on market share by reinventing certain product lines-video slots were reinvented after Aristocrat and Williams entered the market; video poker was reinvented after IGT joined with partner Action Gaming to proliferate multi-hand games.
For more than a decade, each product reinvention had the same end result: IGT commanding 70 percent or more of the worldwide market for slot machines. Five years ago, no one would have thought of IGT doing a corporate reinvention.
But that was five years ago.
Since then, surging competition from WMS, Bally and others has chipped away at IGT’s formerly untouchable market share. While the company still sells nearly as many slot machines as all its competitors combined, those competitors have used new technologies and innovation to gain on the slot leader.
This year, that movement could very well start going the other way. Recapturing IGT’s former market dominance is the primary goal of Patti Hart, who became the new president and CEO of the slot-maker a year ago.
“Our friends at WMS, Bally, Aristocrat and Novomatic are terrifically talented people, and we can’t come to work any day not believing that,” Hart says. “However, if I don’t have a plan to take market share back, then I shouldn’t be running this company. My responsibility is to improve return for my shareholders, which means revenue growth and market share growth.”
In this case, market share growth will coincide with what is a new era at IGT-an era that started when Hart took the reins in March 2009, and began a corporate overhaul the likes of which had not been seen in the company’s history. Costs were cut, processes and product lines were revamped, and most of all, a new team was built, combining seasoned IGT veterans with special talent from outside the company and, in fact, outside the gaming industry.
“In my mind, you build the best teams when you have a perfect combination of old thinking, and all the history, with new thinking,” Hart says. “A number of the new folks who have joined us have brought relevant skills in the areas of sales and marketing, and they are combining that thinking with the kinds of things that have made IGT successful historically. The perspective that has changed is an effort to take the success the company has enjoyed and apply it to new processes.”
Universal Skills
The new team at IGT combines the traditional creative and technological slot development teams, reorganized into a game development “studio” setup, with management and marketing teams rooted in outside industries from telecommunications to IT systems and computer software.
Hart herself has substantial software and telecommunications credentials, having been CEO of Pinnacle Systems and president of Sprint’s long-distance divisions. She joined IGT’s board in 2006, and served as a director until being named CEO last year. Among those she has brought on during her first year are Eric Tom, a former telecommunications and IT-systems marketing executive who was named IGT’s new executive vice president of sales and marketing; Susan Macke, the former VP of global marketing for Hewlett-Packard, brought in earlier this year as chief marketing officer; and Chris Satchell, the former chief technology officer of Microsoft’s Interactive Entertainment division.
Satchell, who was in charge of platform and game development for Microsoft’s Xbox video game systems, is now IGT’s chief technology officer, in charge of the new game-development studios (one headed by Joe Kaminkow, another alum of the video-game business) and the rapidly evolving system business, where IGT is spearheading the move toward server-based gaming.
The new team combines the best of IGT’s traditional business models with new approaches to problem-solving, game development and game distribution-new models that have easily translated across industry lines to gaming from software, telecommunications and other businesses. Hart says the most important feature of the new IGT is flexibility, allowing the company to adapt to competitive pressures and respond to customer demand.
“We continue to adjust our business model to the strength of our competition,” Hart says. “We have earned the hubris for which we’ve become known in the industry; we’ve worked very hard to earn that right. But we will continue to adjust, because the strength of our competition will continue to change.
“You have to resist the notion of shoving everything into one business model, because I believe our strength has been managing our route-to-market through various different business models.”
Hart says the company’s new executives are well-equipped to handle competition. “I don’t have experience in any industry that isn’t fiercely competitive,” Hart says, “so landing at IGT was a great luxury for me, to look and say I don’t have to think about 50 competitors every day. I’m used to being in a seriously competitive environment, as Chris Satchell is, as Eric Tom is, and as all the new folks I’ve added are.”
The same is definitely true of IGT’s new chairman, Phil Satre. The management additions peaked last fall when Satre, the former CEO and longtime executive of Harrah’s Entertainment, was named chairman of the board of directors. “We are incredibly fortunate to have someone of Phil’s stature chairing our board, and I am so fortunate to have him as my sounding board,” Hart says. “He is a very active chairman, the toughest boss I’ve ever had, a very metric-driven human being, and very willing to lead us. We are very fortunate.”
Satre’s addition, adding an operator’s perspective to top management, capped a year in which investor confidence has rebounded, with some analysts saying IGT’s latest earnings projections are actually too conservative. (“Conservatism, in this economy, is the name of the game,” says Hart.) That confidence is being boosted even more this year, which for IGT, promises to be a year of huge product launches and pioneering applications for its sbX series of server-based applications.
Marketing Might
The move to server-based applications is just one element that has prompted IGT to rethink the way its products are sold and marketed. According to new marketing chief Tom, the slot sector today is in a state of transition not unlike the changes his former business, IT systems, went through in past decades.
“You saw the IT industry move from very controlled environments to very uncontrolled environments to outsourced environments to distributed processing of software,” Tom says. “What Patti described to me with respect to gaming was interesting, because it was the third time I’d seen it. In the other two cases, we were leading but we weren’t driving the industry. You were just trailing the marketplace. What’s interesting about this business is that the marketplace was somewhat reticent to what was an evolution, and IGT had the opportunity to lead it into what we’re all hoping will be the future.”
Before the future could be realized, though, Tom would make changes in IGT’s sales and marketing structure, all designed to maximize the company’s core strengths.
“As a company, we needed to reorient ourselves toward the customer,” Tom says. “As opposed to an internal view and a product view, we adopted more of a customer view and a market view.”
A key part of this strategy, he says, has been to simplify the customer’s interaction with the company, and the customer’s access to everything IGT has to offer. “We believe the value we bring to our customers is, in fact, the breadth of the product portfolio-that we can create solutions that together add value to the end customer,” Tom says. “In the past, customers did not have a single point of contact on the pre-sale side. Now, every account manager in our organization represents the entire portfolio. That reorganization was easier said than done, since no one individual is capable of understanding the whole portfolio. We needed to create a system of experts who support that salesperson, so the salesperson is confident to move forward.”
The company also has worked to maximize attention after the sale, particularly in service support on the system side. “IGT had grown up as a product company, so the idea of system and software service was still very unusual to us,” Tom says. “If you have a product orientation, you sell a product, you train the customer on it, and then you leave. If you have a system service organization, your educational process has to be ongoing. So, a big part of the resources we’re trying to pull together is about how you maintain the customer relationship and how you continue the educational process.
“Organizing the system service organization was critical. Post-sale, the company is really responsible for the stability of the platform.”
The most important corporate task for the sales function? Listening, Tom says. “The salesperson is the customer’s conduit to the corporation, so the corporation has to listen to that salesperson,” he says. “When you listen to the salesperson, you’re listening to the customer. The salesperson, customer and corporation have a common objective-top-line revenue and profitability. It’s amazing how evolutionary something that simple really is.”
Lately, listening to the customer has meant helping customers cope with the recession. According to Tom, for IGT, that has meant Megabucks. “When people say a turnaround is imminent, a lot of operators want to feel that way-but that doesn’t mean the capital budgets are necessarily there,” he explains. “We can help the operators now. First, MegaJackpots progressives offer the opportunity to refresh a floor with no cap-ex. In the next six months, we have eight different MegaJackpots launches. Sex and the City was the first one. The Amazing Race followed, and a number of others are coming up.
“We’re also putting money behind the actual launches of these games. We want to create enough energy so that when the machine gets there, it creates a refresh of the floor-on our nickel.”
Another way IGT has helped customers refresh floors is by helping them invest in the new “DynamiX” platform-this involves games that are operator-configurable to be switched between 3D video slots, reel-spinning genres using the “MLD” (multi-level display) technology, various line configurations and denominations-they are multi-game units, made for the server-based environment to switch between games in an extensive library, but usable as a changeable stand-alone multi-game as well.
Tom says IGT has offered operators a pathway to the new technology that also allows a low-cost refresh of the floor, through a gimmick as old as the sales trade-the “buy one, get one.” In this case, it’s buy one, get two. “We were finding customers who had a lot of 960 games (the IGT legacy platform) wanted to refresh their floors, but didn’t want to spend the money for the 960 games or conversions. We said, if you move forward by buying the next-generation technology, our DynamiX platform, we’ll give you two 960 games for free. In a sense, you could actually refresh three games on the floor for the price of one. Some of our biggest customers refreshed 15 percent of their floors with these purchases.”
On the marketing side, Tom says IGT has been working on “branding” the company, both through contacts with customers and through the company’s website.
“In the past, because of its market position, IGT allowed the brand to be what it was, without really trying to direct it,” explains Tom. “With big developments like TITO we let the products speak for who we were, as opposed to communicating who we really believe we are. So, a branding effort is going on now, to understand who we are, who we want to be, what our direction should be going forward, and how we add value for the customer.”
The website will now be the company’s face for investors, customers and players. “A subset of that corporate website represents a portal for our customers to get deeper into our games, technologies, etc.,” Tom says. “It will contain not only marketing material, but educational material. As the market leader, we should be educating our customers.”
Educating and maintaining relationships with players is another marketing goal. In January, Hart brought in Gideon Bierer as the company’s executive vice president of new media. Bierer, who was executive VP of digital media at MTV Networks, is heading up an effort to use the internet and social media like Facebook and Twitter to interact with players. “An effort is already under way in which we touch 50 million players through MegaJackpots,” Tom says. “How do we engage the player more effectively? Gideon will head up our new media effort to address that.”
Tom notes that last fall’s Global Gaming Expo gave his team a “hard deadline” to decide how IGT will be presented to the industry, and to players-and a crash course in coordinating marketing and game development into one effort.
“We already had a really good team; they just needed to be unleashed and allowed to be creative,” Tom says. “Once we said, ‘OK, no more traditional ways of thinking; let’s be creative,’ even simple discussions like what colors to use in the G2E presentations became, ‘I don’t care, as long as it’s not the same!’ We went with lime green and purple, and when you walked into that environment, you knew something was different. It was more of a casino-style environment, which let the ‘wow’ of our games really shine forth.”
Studio City
That “wow” has been supplied by game developers still unsurpassed in the industry. Satchell, the new CTO, used his Xbox experience to organize the game development team into separate studios. However, he says just as important to this effort was improvement of the video platforms on which the games are being developed.
“A hard lesson from the video game world is that if you want to give people the best games, you’ve got to have the best platform,” Satchell says. “It’s been my preoccupation since arriving: How do we work with our platform teams to really make sure we have the best platform for our studios to use? How do we evolve AVP (Advanced Video Platform) as a platform, and give our developers the best tools to be as productive as possible?”
Satchell says his team is in an ongoing effort to make sure the platform allows the developers the freedom to create. “Creating the studios was the first step; now, we have to optimize the studios, the platforms and the tools,” he says. “If I’m an artist and want to make a change, I want to see it instantly. I want to tweak it and see it again. If I want to change my math model, I want to see the payback rate immediately. Having that kind of platform and game development environment lets those studios we’ve created be as productive as possible.”
So far, they’ve been productive indeed. Some of the hits at G2E were the new, interactive MegaJackpots games like Sex and the City, and several games in the new “Center Stage Series,” community-style games featuring one of two giant video displays-the larger a gigantic, 103-inch video monitor flanked by two 40-inch monitors.
“Sex and the City is playing nicely for us in the marketplace,” says Hart. “We’d like to take that and multiply it by 10 or 20.”
The Center Stage games are the subject of all the big product launches slated for this year. “American Idol” is based on the performance reality show; “Wheel of Fortune Experience” uses the big screen for the famous “hangman” game from the legendary game show; and “The Amazing Race” uses the big display to send players on a competitive race across the world.
On the video poker side, the latest innovation is “Texas Hold’em Heads Up,” which employs artificial intelligence to allow the player to actually compete with the computer in a poker game.
All are the products of a shift in game design strategy that brings back the game styles at which the company has traditionally excelled. When IGT was at its most dominant a decade ago, what was arguably the most important catalyst was a parade of video slots packed with entertaining bonuses and video animation. Within a few years, though, the penny denomination demanded more volatility, which led to a more gambler-centric game style-simple player interfaces, strong program math, free-spin bonus events.
Hart says that move away from entertainment-based games was one of the elements that needed to be corrected. “I think there was a great realization that was one of the reasons we were losing market share,” she says.
These days, the entertainment factor is back in IGT games, and better than ever-along with the volatility and strong program math developed over the past decade. Hart says the company now has the perfect mixture of game factors going forward. “It’s not one element of the game that appeals broadly to the public,” she says, “but it is that magic of bringing together math, art, graphics and entertainment into a single offering that really appeals to the customer.”
Satchell adds that the most recent technological advances are broadening the appeal of casino slots, borrowing from the video game world to include features that draw in younger players as well as longtime fans.
“Certainly with AVP and DynamiX taking off, it’s a good ramp to some pretty advanced technology,” Satchell says. “It will take some upgrading of the floor, certainly some upgrading of our design skills, and upgrading of how we draw in the patrons. We can’t increase the complexity of games in a way that leaves patrons confused.” He says slot machines should employ the “ultimate 15-second approval process” for players. “If someone sits down and puts a twenty in, they want fun immediately. There’s no spending that twenty learning the game.”
Actually, IGT is already employing elements in new games that are broadening the audience to include younger players. He says there are three elements that draws young players-competitive play, collaborative play and what Satchell calls the “meta-game.”
“From my background at Xbox, I noticed that people really want competitive play, but more importantly, they want to make sure the results of that competitive play get broadcast-they want their friends to know,” Satchell says. “But equally important to players is collaborative play. People really enjoy collaborative games in the online world-think about ‘World of Warcraft’ and ‘Blizzard.’ There is a lot of collaboration, and what do they do when they get together? They go and attack the big dragon, which is run by the game itself. Think about the casino environment-you can imagine people collaborating together to get the big bonus so they can get a win over the casino. It’s a powerful metaphor.”
Just beginning is the addition of the “meta-game” concept, which is the idea that players on individual slot machines are taking place in a larger game with specific “achievements.” “We’ve found it is a powerful idea that what you’re playing builds up to something you find important,” says Satchell. “In Xbox, it’s the gamer score. People love it, and they love that friends can see and compare gamer scores. We’re not sure yet what the analogue is in the gaming world, but when you put these three elements together, I think it will give you the first glimpse at the future of the slot floor.”
Server-Based World
For IGT, all the new technologies leading to the future slot floor lead to an Ethernet-connected, server-based floor-the networked world that is now under a giant test at CityCenter’s Aria casino, and on a smaller scale at a growing number of casinos using more limited versions of IGT’s server-based system, called “sbX.”
In addition to the full-blown Ethernet setup at Aria, IGT has proliferated the server-based concept through “Tier One,” a smaller server system that links 40 to 100 games, which allows operators to see what networked floors can do without a complete retrofit.
“Aria shows how effective you can be when you start with an Ethernet floor, but the good news is there are a lot of operators who have been quite visionary,” says Satchell. “Even though not running a full server-based initiative yet, they have put the infrastructure in, or they’re doing it as they upgrade. So, I think we’re moving toward a digital world which I think gives operators a lot more flexibility, and certainly gives us the ability to design more interesting games. Tier One provides a great introduction. You can put these advantages at the bank level, to have multi-game features that will get a greater yield out of the floor.”
Hart and Satchell both agree, though, that Aria provides a glimpse at the future of the slot machine-a fully integrated, Ethernet-based floor. Hart says that for now, server-based “is more about the operator than the patron,” giving the operator efficiency, the ability to download and reconfigure games, and interact with the player in new ways, through the service window that is part of every slot machine on an sbX system.
“The next phase, which is the application layer, will be more differentiated at the patron level,” Hart says.
Those applications are already being created by customers as well as IGT engineers. Tom notes that the open architecture allows operators to customize their slot operations. “We have customers on server-based gaming who are developing applications, and we don’t even know what they are-which is great,” Tom says. “They own the API (computer-ese for application programming interface). Our customers can guide their application developers better than we can, because it’s their business. Certain applications within the next six months you’ll see from our customers, you’ll say make absolute sense, but they won’t be coming from us.”
Beyond customized applications, Satchell envisions a fully networked floor in which younger players will be able to compete and interact through social networks through the slot service windows, trading news of scores and achievements over Twitter or Facebook without leaving the slot. “We would certainly want to do connections to social networks,” he says. “Younger players love the social connection, to the point they don’t like dealing with devices that do not have a social connection. They’re always connected to their community. Imagine being able to sit down at an EGM and also be connected to your community. ‘I just got a jackpot!’ communicated over the service window.”
IGT is still opening the door to this new slot world through sbX and its new game offerings, and for Hart, the continuing exploration and adoption of new management approaches is the best way to grab back the kind of market-share dominance the company once enjoyed.
“It certainly is our expectation that the products we’re building, and the team we’re building, are focused on growth, for our shareholders and for the company,” Hart says. “You can grow revenue by relying on expansions and openings, but you’ll only grow at the market rate-which does not allow me to have the stock multiples that reflect a growth company. And we need to be a growth company. That means the growth needs to come out of the hides of my competitors.
“So get ready-here we come!”
