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Street Smart

Small stakes mean big revenues as server-based systems improve European street slots

Street Smart

The differences between the various gaming machine sectors of Europe can be as great as the difference between east and west. Literally.

Throughout the former East Bloc countries, high-stakes, big-jackpot slot machines can be found in the all-electronic casinos that have proliferated there over the past 15 years. Meanwhile, back in the West, hundreds of thousands of low- and lower-stakes street machines grind away in arcades, cafés and betting shops, existing sometimes not so harmoniously alongside standard casino operations.

In Germany, for example, the 200,000-plus machines in the street-slot sector, limited to maximum payouts of €500 per hour, produced gross revenue of €2.75 billion in 2006. That was four times the amount generated by the 7,000 slots located in Germany’s 81 casinos, according to figures from German casino association DeSIA. Now, with casinos operating under restrictions on smoking and more stringent entry requirements for players in the past year, results for 2008 are expected to be even more lopsided.

In the U.K., fixed-odds betting terminals feature animated sports scenarios with a range of pre-determined, short-odds outcomes. These FOBTs accounted for 25 percent of revenue at bookmakers William Hill and Ladbrokes in 2006 and for over 50 percent of the British tote’s £2.5 billion gross revenue in 2007. The FOBTs, also known by their official designation of Category B2 gaming machines, are found in the U.K.’s 8,800 betting shops. They have a maximum stake of £100 and pay out a maximum win of £500. The machines compete easily with longer-odds casino slots, which are allowed to pay out £4,000 for a maximum stake of £2. The betting shops also are more accessible than casinos, which like their German counterparts require identification to enter and which also must abide by a smoking ban.

Another class of slot in the U.K., the Category C amusement-with-prizes machine, recently was the subject of a stake-and-jackpot increase. In fact, both the maximum stake and the maximum jackpot were doubled on the 130,000 or so AWP machines-to £1 and £70 respectively.

In Austria, the low-stakes sector has reached new heights with the Admiral Casino Prater. Admiral, one of the operator divisions of the Novomatic Group, invested €20 million in the design and construction of this huge electronic casino that features 450 gaming machines, including several electronic table games.

Outfitted with two sports betting areas and a fine restaurant, the property easily passes for a “real” casino-until you realize that the machines have a maximum stake of €0.50 and pay out a maximum jackpot of €20. Casino Prater is located in Vienna adjacent the famous amusement park for which it is named, and makes a strong statement about the importance of the small-stakes player.

Changing the Game

It is not just investment in design that is signaling a change in the low-stakes arena. Technology is beginning to blur the lines that traditionally have separated the various gaming machine sectors, allowing the operator to enrich the playing experience at even the lowest end of a market. Talk of downloadable, server-based gaming has been making its way through the casino industry of late, but its presence is already being felt in the street markets.

“The key factor is that the technology is allowing the operators to have more control over machines,” says Peter Cercone, business development director at server-based gaming specialist Videobet. “What the technology brings is the ability to optimize even very small locations, with two or four machines, to be able to offer different game content during different parts of the day, and to optimize it over time.”

Without the ability to download games directly to terminals, an operator of such a small location traditionally is dependent on the supplier’s time and manpower constraints when it comes to switching out games. The operator must first contact the supplier, and then the supplier has to arrange to deliver a new machine or physically install a new game.

Of course, such a thing as changing games repeatedly in the course of a business day is not doable without the new technology.

When slots are connected to any central server, the range of services and benefits available to the player and the operator expands greatly. Operators can track play and institute loyalty clubs, of course, but other possibilities also arise.

For example, Videobet, a wholly owned subsidiary of online gaming operator Playtech, has developed a cross-platform product that allows the player to get involved in a game at a physical location, such as an arcade or betting shop or local pub, and to continue playing that same game at a different location-even at home, online. A cashless card system allows the player to use a slot machine at an arcade and later, at home, to use the same card to go online and download the exact same game that was being played in the arcade.

Downloadable is downloadable, whether to a slot machine or a personal computer.

From a regulatory standpoint, the new technology has the potential to give those charged with overseeing the industry the highest level of insight into what is happening in a given slot system, at any given moment. However, that kind of usage requires knowledge.

“It is a double-edged sword,” says Cercone about this capability. “It gives the regulator more control over the actual gaming operation. The regulator can now log on to a terminal that is connected to all the terminals in a street market and know instantly whether there are any unauthorized games running, whether there is any potential fraud being done. This is one side of the coin.

“The other side is that the technologies that are used, and the systems, are by their very nature probably four or five orders of magnitude more complex than what a typical regulator might find usable. It really gets down to the regulator understanding the limitations and the advantages of the technologies used in server-based gaming. If you have a regulator who has been used to stand-alone machines, EPROM-based devices, it is a very big step for the regulator to understand how to use (a server-based system) to better regulate gaming.”

Aside from the ability to understand the technology, regulators can find themselves hampered by outdated gaming legislation that had been written so precisely as to prohibit the introduction of new technologies, even when those technologies would improve the regulatory task.

However, as regulators become more familiar with the new systems, it is expected that they will encourage their lawmakers to review and amend existing gaming legislation, to allow the adoption of the improved tools.

The server-based technologies are appearing in the street market faster than they are in the traditional casino market. Perhaps the street will turn out to be the proving grounds, the minor leagues, for the new systems.

Says Cercone, “The downloadable games, extended functionality from the monitoring control engine, having a richer distribution channel to the player, being able to offer new services via the technology to the player in the casino, is exactly the same as what can be and what is being applied in the street market and the route market around the world.”

In this case, that seems to show it’s not always the size of the stake that matters.

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