Jamie Odell is not Superman, the cartoon hero who appears on one of Aristocrat’s most popular slot machines. But Odell has accomplished something Superman or any other superhero would not have been able to pull off: the turnaround of a somewhat complacent slot machine company with great bones and a true gaming legacy.
After starting in the garage of founder Len Ainsworth, Aristocrat Leisure grew into an industry giant, the 800-pound gorilla of the Australian slot market. Its games became popular with the club audience in Oz and later became hits in the casinos. The jump to the U.S. market in the 1980s really transformed the company, however, as the Aristocrat video products became instant hits in Indian Country and regional casinos.
After the exit of Ainsworth, the company continued to develop top games and systems. However, a succession of leaders failed to instill the intensity and imagination that the company had historically been known for—or the share price investors were expecting—until the appointment of Odell.
Even after he was named chief executive officer and managing director, some questioned Odell’s background, which hardly suggested any familiarity with the Aristocrat products. Moving from his position as MD of the Asia-Pacific region for Fosters, the legendary Australian beer, wine and spirits company, Odell’s previous work experience was rooted in sales of different products. It is that emphasis on sales that was apparently what Aristocrat needed. Odell has led Aristocrat to increasing impressive financial results, while developing cohesive strategies for the future that all slot companies are eyeing.
A self-admitted workaholic, Odell’s daily focus says everything about why the company has responded to his leadership.
“I have three groups of priorities that I focus on each day,” Odell explains. “The first element is ‘core momentum,’ and that’s really what drives the numbers for the next year or two. This is really crucial because this is what pays the bills. We’ve seen in the last few years the ability to grow our install base in our chief market, gaming operations. This is a highly competitive market and is being driven by Rich Schneider, who joined an established and strong management team. No one gives you any favors in this market. It all comes down to quality of product. I’m very confident we will continue to grow in that area because we have great momentum.
“The proprietary game portfolio is also very competitive, especially in the U.S. We continue to drive hard on that, and of course, we’re adding stepper products for the first time, as well. Innovation around core growth is what is going to drive profits for the next couple of years. We’re going to be very aggressive in driving new innovation in our core products.
“The second area is ‘industry transformation.’ This is really about the long-term future and legacy we’re going to leave for this industry. I’m talking about the mobile applications, the online content, and the new territory that we will explore in this fascinating business.
“And the last one is people and culture. I know that having great talent who are fully engaged in the business is very important. Continuing improvement is so important to a business like Aristocrat and hiring great talent to build a strong team is critical in achieving a successful outcome.
“I am proud to say we are attracting some very talented people through some of our recent hires. People are actually coming to us wanting to work at Aristocrat, which is a great position to be in. Everyone understands that we’re in a competitive market and we try to reward members of the team for new innovations and thinking outside the box.”
The Stock Roller Coaster
It’s a bit frustrating for Odell, however. Even after posting a healthy profit rise in the first-half report for 2012—a 39 percent increase in net profit for the quarter—analysts were mixed in their reaction.
“We said we would deliver a turnaround, and we are,” Odell told investors in August. “Moreover, we are achieving this in very challenging conditions globally, with obvious potential for more upside as economies improve.
“We know we have a long way to go before we can say the business is truly delivering to its full potential, but today’s results reinforce that we are absolutely on track and our turnaround is no longer a promise—it’s a reality.”
Some analysts were concerned that ASPs (average selling prices) in Australia and North America were slipping. Even with a 400 percent increase in sales in the Australian state of Victoria, the company’s share price rose only slightly to $2.77.
In many instances, says Odell, the share price is out of his control.
“We’re focused very strongly on the things that we can control,” he says. “We’re into the final stages of our turnaround plan and I believe it’s starting to show results. We’ve been showing consistent improvements in each reporting period, including the one we recently announced.
“We’ve seen more top-line growth, increased share, good quality products and increased revenues.”
The share price, according to Odell, is symptomatic of a problem that has recently been felt across the gaming industry.
“The industry clearly is no longer seen as a growth industry,” he contends. “That’s something that is out of our control, but is certainly an issue for the industry. Share prices reflect the industry that we operate in, and one of the things we have to do collectively is to make sure investors feel as excited about this industry as we do. We need to put out the message that we are confident in the future of this industry. We’re all in this together.”
And it’s not confined to the gaming industry, says Odell; it’s part of the overall business climate.
“There’s also a certain level of nervousness in the market,” he says. “When you see the swings that can happen from day to day, nothing fundamentally had changed, but it impacts everyone. There’s fragility in the shareholder base at the moment, but we are convinced of our long-term performance potential.”
Despite attention on the quarterly earnings reports, Odell insists he’s focused on the long-term health of the company. While Aristocrat does business around the world, Odell explains that the company focuses on three core markets.
“Our approach to games is unique,” he says. “It’s about lead markets for us. North America, Australia and Macau are the most important markets for us and if one game is a success in one of those markets it leads to success in others.”
Competing on its home turf is important for Aristocrat. In a difficult market, Odell says Aristocrat has been working with regulators and politicians to ensure that the marketplace is level for all competitors.
“In Australia, the competition has gotten much better so we’ve had to raise the bar,” he says. “I’m fine with that. It makes us do things better, so we are not complacent when it comes to defending our market share.”
The Asian market is almost like home for Aristocrat, where it claims a market share in Macau of between 55 percent and 65 percent of the admittedly small number of slots. Aristocrat also has the leading market share in Singapore. Odell says the company will increase its focus on the region.
“We feel very close to the Asian market here in Australia,” he says. “It enables us to understand what the successful games in Asia are. We have many folks with Asian backgrounds in our studios. They really do understand the Asian player. The Asian players love to gamble, it’s less of an entertainment thing for them and we’ve worked closely with the operators to make sure we’re offering the games they want.”
The company rolled out several Asian-themed games at G2E Asia in May and expects to debut another series at next year’s gaming show in Macau.
For Aristocrat, success has one name: America. The company’s games have long been favorites of the American player. The bright graphics and innovative game play have been trendsetters in the industry.
Odell recently announced the appointment of Atul Bali as head of Aristocrat Americas (see sidebar on page 34). After four months on the job, Bali says that his background as an executive with several technology companies will serve him well.
“Aristocrat is a technology company,” he insists. “It’s a content-driven games business, but underlying everything it does is technology. Particularly in America, where the systems business is booming.”
Odell explains the importance of America to Aristocrat.
“It’s clearly our number-one market,” he says, “and we have a great team over there. We’re working with three revenue streams in the U.S. The first is our gaming operations business, which is really our top producer. We’ve made great progress there in the last few reporting periods. We’ve been looking to drive the install base and deliver better products. This represents the tailoring of games for specific markets. Games like Tarzan and Superman have done very well there, with more to come. We’re looking at the big themes, signage and increased wide-area-progressive products. We’re molding that with our core strengths—great mathematics, great graphics and great game play.”
Like Asia, Odell says games are being developed specifically for the Americas.
“We have four games studios in the U.S. manned by people who go to the local casinos and understand the U.S. gaming experience,” he explains. “So we don’t try to force the successful Australian games into the market. We try to understand what the U.S. players want.”
While Aristocrat has always been successful in local markets and stand-alone casinos, it sometimes has been a challenge to make meaningful sales to the major gaming operators for placement in Las Vegas and other major gaming destinations.
“We’re still strong with the tribal casinos and the local operators,” says Odell. “Great games like Buffalo continue to be market leaders in that segment. We’re going to focus more and more on the core Aristocrat games, the things that made us successful in the first place. We think this will also appeal to the corporations where perhaps we haven’t been as strong as we would have liked to be.”
The systems business is another strength for Aristocrat. The company’s Oasis 360 system was one of the first developed by a slot company, and it was the gold standard for many years. But when he came on, Odell realized that it needed to be updated.
“Oasis has grown and matured over the past couple of years,” he says. “Our customers have become more engaged and understand that Oasis 360 is a great system. I’m very proud of our systems team in delivering great results for our customers. We have about 290 outlets using the Oasis 360 system.
“A few years ago, the system needed enhancement and investment. Systems are now much more than transactions, wallet and the financial aspects of the business. We had great conversations with our customers a couple of years ago, and as a result we’ve added more bells and whistles for them. We’ve got more than 20 modules that can be plugged into the system to give it more value. So Oasis 360 has become an overall solution for our customer base, allowing them to analyze data, help them with their marketing and give their players a better experience on their property. I think it’s one of the most obvious examples of the successful turnaround, when I consider the feedback we had two years ago and what we’re achieving today.”
Another recent American development has been the opening of the VLT or street market in states like Illinois, South Dakota and Montana. Many analysts expect this to be a strong trend in upcoming years, so Aristocrat is planning to get involved.
“We’ve never really been in that market in North America; however, we are getting ready with our first entry into the Alberta VLT market, which will go live in the next few months,” says Odell. “We’ve only just begun to spread our wings up there and that will give us the opportunity to go north of the border with our products.”
Bali says he’s developed a strategy for the market.
“The history of Aristocrat hasn’t been close to the street or the VLT market, but we’ve started to have some success there,” he says. “I’ve done business there in the past so I’m particularly interested in this. We’ll have about 250 games in Alberta later this month, and we think they will perform extremely well in those environments. We have a well-thought-out strategy for the Illinois, South Dakota and Montana markets. We will take a significant share of the market there. We’re a video-based business, so we feel it’s a market that’s there for the taking.”
Themes and More
The themes developed by Aristocrat recently have been very successful down through the years. “Jaws,” “Tarzan,” “Zorro” and the recently introduced “Phantom,” “Mission Impossible” and “Rockin’ Olives” machines themed by the artist Michael Godard have all earned a place on casino floors worldwide.
It’s the company’s proprietary themes that led its success and are being re-introduced in a Legends series that adds excitement and more interactivity to already-popular games. The “Cashman” games, the “Queen of the Nile,” “5 Dragons,” just to name a few, will be given updates and new game play.
“We’re very proud of our themes, and you will continue to see us roll out new themes,” says Bali. “This is a company that has had enormous success with our proprietary brands. Our Legends strategy of giving the players more features around very well-recognized games, with great mathematical models, allows us to keep about a 50-50 mix between proprietary and themes. This makes us unique in the marketplace.”
But Odell’s focus on the future of the industry is very much in play at Aristocrat. The disappointment of server-based gaming and the total solution it seemed to offer was not a shock for Aristocrat. While the company continues to design a system that would have all the bells and whistles promised in the early days of server-based, it has also designed an interim system that has been very well received by customers.
“I’m not surprised that operators are not willing to invest millions of dollars in full-floor solutions, because it’s not giving the yields that were anticipated,” says Odell. “So we’re going to focus on downloadable games. The solution we have now is a step towards the full server-based platform, but without the huge costs. It’s called Aristocrat On Demand and it’s live in multiple sites. It gives you any number of games you want, very painless to install, and very secure. It works across all systems and is not just reliant upon our Oasis 360 system. It allows the operators to offer a wide variety of Aristocrat games. We see this as a solution that works for any casino, and it’s proving itself very well.
“We’re going to continue to increase the library of games we offer with Aristocrat On Demand.”
Aristocrat has also been cautious about investing in online gaming. While other slot manufacturers have spent millions investing in companies that develop online gaming, Aristocrat has again taken a measured approach. It has developed a “free-play” solution, nLive, which enables casinos to offer a free-play site, branded to their particular casino. The system is compatible with the Oasis 360 slot system, which provides a seamless experience for online players visiting the casino.
“What we’re learning is the people who play the games are actually adding more value and playing longer when they come into the casino,” says Odell. “So there is connectivity between this free-play environment and what actually happens when they’re in a real casino environment.”
Bali explains how the first installation has been a resounding success.
“Maryland Live! casino is our flagship site,” he says. “We have 30 of our games on that site. It’s probably the most powerful marketing tool they have at the property.”
Aristocrat has signed up several more casinos as a result of this success and Odell expects more casinos to be involved in the near future. He says it will be the ideal bridge to legal online gaming when that time comes.
“We are really encouraged by what we’re seeing with nLive, and there will come a time when more operators see the value that it’s delivering,” he says. “It’s giving players options when they want to play online and we’re developing a very safe, clean, regulated solution that can simply be turned on when online gaming is legalized.”
The Aristocrat online strategy is aggressive without too much investment, says Odell.
It’s good planning and forward thinking,” he says. “In the short term, however, it’s adding immediate value by the connectivity it’s giving the operators with their online free-play customers. We have content deployment in the regulated European jurisdictions. We’ve chosen Europe to license our brands to operators there and they have been very successful. I’m very comfortable where we are in this area right now. The only drawback to an early move is the time it’s going to take for our industry to regulate this new aspect. However, we are working with regulators to monitor this.”
Odell says that the increased competition in the slot-manufacturing field is a good thing for everyone involved.
“It’s kind of boring to live in a world where someone has a monopoly on great ideas,” he laughs. “That’s not happening in our industry. It’s getting better and better, and bringing lots of options for operators. It’s energizing our business. It helps me with my messaging to our team that we can’t be complacent. We want to have the world’s greatest gaming content, and that is the underpinning of everything we do. In the future, that content will be distributed online, free play, through online solutions, mobile phones, tablets and iPad applications and more. We are really motivated to provide the best games and the best content. We realize that we may not control the methods of delivery, but if we own the content that people actually see and play, this will no doubt be extremely valuable for our company.
“I believe the industry is producing the best content it has ever produced, and that’s a good thing. We don’t shy away from it. We embrace it. When I look at our products this year, they are so much better than they were just two years ago. We have raised our standards, and with it the expectations of our customers.”