Gambling first became legal in Nevada in 1931, but slots have been around a lot longer than that. The original modern-style slot machine, the Liberty Bell, was introduced way back in 1899. Invented by a San Francisco auto mechanic named Charles Fey, it had three spinning reels with diamond, spade, and heart symbols, plus the image of a cracked Liberty Bell.
The lucky player who got three bells in a row could win up to 15 bucks, a real jackpot at the time.
Though slot machines have been around for well over a century, they’ve never really gone out of style. In Las Vegas, major properties like the MGM Grand have thousands of them, on gaming floors the size of football fields.
And no wonder. Slots today account for about three-quarters of casino revenue, according to a 2013 study from the University of Oregon. According to that same study, in the 1970s slot win was closer to 40 percent of total gaming revenues. But these days, between 70 percent and 90 percent of American gamblers say they’d rather play slot machines than table games.
For the casino operator, the real jackpot is generated on the slot floor. But things may be changing. Rapid, fundamental and ongoing changes in technology may require a revolution in slots—a revolution the industry may not be prepared for.
Getting Reel
The accessibility, interactivity and do-it-all capability of today’s computers and mobile devices could make the current inventory of slot machines seem way too yesterday. That may not appeal to the 20- and 30-somethings who one day will edge aside their parents to be the industry’s biggest target market.
The player pool is already engaged, according to the American Gaming Association. In its 2013 State of the States report, the AGA said young adults 21 to 35 have the highest rate of casino visitation; nearly two out of five, or 39 percent will patronize a casino in a given year, and about half play slots or video poker. In addition to visiting casinos at a higher rate than other age groups, young adults are more likely to come back. In 2013, nine out of 10 said they planned to return to a casino in the coming 12 months.
The statistic is encouraging. But it doesn’t mean these customers will age into traditional slot players. Frank Neborsky, a 30-year veteran of the gaming industry and former vice president of slot operations at Mohegan Sun, says diehard slot players—that stable, reliable 45-year-old to 60-year-old demographic— “are not being replaced as they fall off.” The main reason could be the dizzying pace of technological advances.
“Their technology is different,” says Neborsky. “Their level of entertainment is different. You have so many first-person shooter games and one-on-one skill-based games; with Xbox 360, you could be sitting at home playing a game against people 2,000 miles away in three different time zones.
“That’s the kind of entertainment people in their 20s to early 40s have been used to over the past decade. And nothing in the gaming environment really duplicates it. I don’t know if simple reel slots, video slots or even table games will create the same type of sensory satisfaction or entertainment these folks will be looking for” in the years to come, he says.
While some accommodations have been made for this new wave of tech-entrenched players, the games have pretty much stayed the same, says Neborsky. And a failure to innovate on the slot floor could cost the industry in years to come. “Other than trying to leverage the internet or other online components, I don’t see a lot changing in the way they’re packaging the games or the experience they’re going to offer,” he says. “There has been no truly out-of-the-box new development that’s going to revolutionize the way gaming is looked at.
“And quite frankly, I don’t see someone who is used to playing ‘Call of Duty’ or ‘World of Warcraft’ walking into a casino and sitting at a slot machine.”
Getting Social
Another critical factor is the social aspect demanded by younger patrons. For example, table games have emerged as a compelling entertainment option for that age group “because you get half a dozen guys at the same blackjack table who enjoy the social part of gambling,” says Neborsky. “You don’t get that in the slot environment.”
Andrew Klebanow, co-founder of Global Market Advisors, agrees the games will have to change to stay in line with technology and with increasing customer expectations. He doesn’t agree that the traditional slot-playing demographic is going to disappear.
Everyone knows the stereotype: a middle-aged woman who sits for hours at her favorite “Lucky 7” or “Major Moolah” machine, cocktail in hand, staring at rotating reels and flashing lights until she hits the bottom of her bankroll. She’s happy to walk away a little ahead of the house. But she’s willing to return even when she doesn’t.
“That’s not a stereotype,” Klebanow says. “It’s a fact. You need two things to be an avid slot player—time and money. Under 45, you’re raising a family, you bought a house, you’re working hard and trying to pay the bills. By the time you’re 45 and older, your house is probably paid off, the kids have moved on and you’re not working as hard as you used to. You have time and money, and at that point gaming becomes a form of recreation you can participate in with some degree of regularity. That won’t stop unless people stop procreating.”
Does that mean today’s tech-savvy player will morph into the old faithful slot jockey?
“Yes!” says Klebanow. “Are those people going to change? Absolutely. Casinos are finding ways to offer games that will appeal to that demographic as they approach that 45-year-old threshold, when they start having time and money.”
Besides, he argues, slots have always evolved with the times. The one-armed bandits of olden days became the electro-mechanical slots of the 1960s, which became the video slots of the late 1970s, which became the fully computerized machines of the 1990s. Those machines made way for progressive slots in the mid-1980s. And in the 1990s, along came electronic video slots “that really changed the nature of the games we have today,” says Klebanow. After that came the bonus rounds and highly themed games—“Ghostbusters,” “Wheel of Fortune,” “Sex and the City”—some of which remain among the most popular games of all time.
The next big innovation may be something completely different, and it may be in development right now.
One thing casinos can count on, suggests Klebanow, is that entertainment preferences do shift over the course a lifetime. “When I was a young man, I was a bartender in a nightclub,” he says. “I cannot walk into these places today. I don’t get them. I can’t understand why anyone would spend $1,000 for a bottle of Grey Goose, but apparently that’s appealing to a younger demographic. And we have dozens of planes flying into Las Vegas every afternoon and evening filled with young adults eager to spend their savings in the nightclub scene.”
One day, he suggests, after they sober up and settle down, these patrons will likely spend their discretionary income on different types of entertainment—including slots, if the games evolve to meet their demands.
The Drop Bucket
Matt Davey, CEO of NYX Gaming Group, says the method of delivery for gaming products may be even more important than the products themselves.
“It’s important not to get confused by digital gaming like Xbox or Playstation and assume that type of technology is going to be driving casinos going forward,” he says. “A lot of people approach us and say, ‘Hey, we have fantastic games, just like Nintendo, and we can dramatically advance the quality of games you have to appeal to a younger audience.’ That’s a mistake; some of the best-performing online games are some of the oldest.”
From Davey’s view, as head of a company that offers hundreds of slot games for mobile, land-based, desktop and social channels, the way consumers play actually could trump what they play.
“Look at all kinds of entertainment—TV, radio, music, etc.—a huge amount of it is moving to digital and internet-based consumption. It’s the same kinds of games, played in a different format. People like it because they can play immediately and they don’t have to drive anywhere. That appeals to a younger group, but it also appeals to the existing casino player.”
According to Davey, demographics broken down solely by age can be misleading; for one thing, older casino patrons are hardly tech-averse. “We prefer not to talk about demographics, which relates only to age,” he says, “but about cybergraphics, what people do and don’t like.”
For example, he notes, sports betting, poker and blackjack are more popular among younger players than slots, bingo and scratch cards. “That group will be younger online and younger in the casino,” says Davey. “And when it comes to bingo, for instance, you will find the online age group is just like the land-based age group.” He says interactivity and ease of access will appeal not only to young players, but to “older groups switching to these types of gaming.”
Paul Tjoumakaris, corporate vice president of slot operations for Seneca Gaming Corp., predicts the slot floor of the future will look a lot different from the giant floors that are typical of most casinos today.
“In the next 10 to 15 years, as more and more people get into mobile-type options, casinos are not going to have the large capacity of slot product like you see today, with banks and banks of machines. The inventory will be cycled out by attrition and the environment will change to accommodate smaller rooms with different décor.
“We won’t have these big open spaces,” says Tjoumakaris, “and the existing games will be slowly weeded out and replaced.” Perhaps as significantly, “regulators will be looking at more skill-based games. Even now, we’re looking at that factor. We need to attract that younger generation, and they’re not interested in just hitting that button.”
Though slot machines as we now know them may always have a fan—base?if only for reasons of nostalgia—“as vendors and operators, we have to maintain the loyalty of that new group by incorporating some skill, more interaction, and a little more excitement,” says Tjoumakaris. “We have to adapt. Even the suppliers no longer want to support the old product; they’re slowly trying to make things cheaper and more interactive. And the development costs are going to force them specifically to try to accommodate the growth opportunity.”
No Full-Tilt Change
Eric Meyerhofer, CEO of Gamblit Gaming, agrees that “a pure stand-alone slot can’t offer the range of excitement” expected by customers weaned on high-fidelity, multi-functional, lightning-fast technology. But it’s not time to make a radical change—yet.
“From an operator’s perspective it wouldn’t be prudent to shift an entire floor, do a new type of game and in the process rip out what is a pretty solid, very mature market,” says Meyerhofer. “I also don’t think they should be trying to morph the slot machine into some sort of ‘tweener’ product, if you will, which may turn off the player who is more interested in a stronger slot” with superior features.
Instead, Meyerhofer foresees “a migration process” in which the casino floor is gradually repopulated with gaming attractions designed to capture the interest and loyalty of the emerging player.
“We’re speaking to operators about starting to shift a portion of the floor—not a large portion at first—to more of a day-club experience, the kind of thing that’s more familiar and common to the type of player we’re talking about, 21 to 45.”
That could be mean pods on the gaming floor where kids can hang out together and share the experience, rather than sitting solo at a slot machine. According to the AGA’s 2013 States of the States, young adult visitors are “more likely to take advantage of non-gaming amenities like shopping, live entertainment and recreational facilities like spas or pools.” In part, that may be because they’re not dazzled by the options on the gaming floor.
“There’s a very touchy-feely close-personal-space engagement that takes place within the bars and the nightclubs, where a bunch of people get together, rent a booth and spend hundreds of dollars for a bottle of vodka or rum,” says Neborsky. “It’s a different kind of experience than bellying up to the bar to get a drink.”
That same kind of dynamic, with the same opportunity for up-close-and-personal engagement, could be replicated in the gaming environmment. “That whole social piece is the way they like to interact; it’s the way they’re programmed,” Neborsky says. “What you do and what you’re seen with plays a big part in their lives.”
Meyerhofer agrees. “When it’s too early to go to the nightclub or bar, (these patrons) sit in their rooms, watch TV and get on their devices, because they don’t have a place at the casino to anchor them or capture their fascination,” he says. “They’re already there. But you have to provide some area on the floor to attract them during that idle time.”
The Future is Now
Casino operators and gaming manufacturers may not be surprised by the technological revolution, but they’re “surprised at the rate at which it’s happening,” says Meyerhofer. “The takeup of smart phone devices is a lot more rapid than we would have believed six, eight or 10 years ago.” And it’s hardly exclusive to 20-somethings.
“People projected it would take a while for the older demographic to adopt the smart phone, but it’s exploded,” he says. “In airports, on buses, wherever people are killing time, they’re on devices, at all age ranges, and that also has been a big surprise.”
Moreover, the average age of players for video games and other casual entertainment games on iPhones and other mobile devices is well into the 30s and 40s now. For example, according to an April report from Flurry Analytics, smart-phone users who qualify as “mobile addicts”—as distinguished from regular users and “super users”—is the fastest-growing segment, posting 123 percent growth between 2013 and 2014. And the most addicted are teens, college students and middle-aged parents, with more women in the category than men.
“If you combine a few groups and take the 25- to 55-year-old users, the No. 1 use of devices is playing games,” says Meyerhofer. “That outstrips internet use, social networking and all those other things. These people are not going to be able to find the product they want on the slot floor, which does not appeal as broadly as it used to. It does represent a difficult trend for the industry, but it’s not something to run from. It should probably be embraced and managed. It’s just a matter of transitioning the floor over time.”
With no crystal ball at the ready, it may be hard to visualize the smaller, reconfigured, more intimate slot floor of the future, colonized by devices that bear no resemblance to the slot machines of today. But that’s for the operators and manufacturers to figure out.
“The games will be different, for sure,” says Klebanow. “They’ll be more interactive, and they’ll look different. They’ll probably look like my freaking phone.”
