Inside Asian Gaming

37 36 s a large, growing and vibrant casino market, California has become something of a bellwether for electronic gaming manufac- turers. “Games that enjoy success in California typically enjoy great success across the coun- try,” said Marcus Prater, senior vice president of marketing for Bally Technologies. “It is a very good barometer to use when evaluating individual game trends, as well as the direc- tion the industry as a whole is heading.” “California usually has the benefit of get- ting games before anyone else in the country due to faster approvals and closest shipping locations,” added Brad Johnson, vice presi- dent of marketing for Aristocrat Technolo- gies. “Since California is usually the first to get new games, we can safely assume that games that do well there will do well in the rest of the country.” And it’s a market that has the poten- tial to point the way to the future, as Chuck Hickey, director of slot operations at Barona Valley Ranch Resort and Casino in Lakeside, near San Diego, saw with ticket-in/ticket-out transactions at slot machines. “We were the first to go all ticket-in/tick- et-out,”he said.“California was originally tick- et only, but just with ticket-out. Then Class III gaming came in and some saw it as a pana- cea to follow Vegas and get coins. At Barona, we saw ticket-in/ticket-out as something that will be very cool, and so we adopted that. It’s convenient, clean and secure, and it’s spread like wildfire.” In addition to being a gaming machine and technology trendsetter, California is also a growing gaming market, at least when it comes to casino wagering. Dr. Alan Meister, who is in the process of preparing his 2006 Indian Gaming Report for the Analysis Group of Economic, Financial and Strategy Consul- tants, said that in 2005, California casino rev- enue grew by 21 percent, increasing to $7.2 billion as opposed to $5.8 billion in 2004. Nearly all that growth was incremental rev- enue at existing casinos, with only one new facility contributing to the increase. “It’s a good market, with a lot of people who like to gamble,” Meister said. “It’s near Las Vegas, and there are people who know Cal Tech California casinos have become prime proving grounds for the latest slot advances gaming. California is bringing the gaming closer to the customer. “There’s a good amount of growth forth- coming, Meister added, “depending on the outcome of legal, regulatory and political events.” The market would be wise to heed Meister’s words of warning. Indeed, despite continued casino growth, California is not without a host of challenges that could cast a cloud on its bright gaming future. Second-class concerns The primary concern for casino operators and game manufacturers in the California mar- ket remains the yet-to-be-determined new standards for Class II gaming machines be- ing considered by the National Indian Gam- ing Commission. There is fear that the new standards could slow down Class II game action, which would ultimately make the de- vices less profitable. That’s a problem in Cali- fornia—a hybrid market, where even some Native American casinos that have Class III compacts use Class II gamingmachines.Most compacts currently limit tribes to 2,000 Class III games per facility. “For tribes that have reached the cap, the only way to expand is to add Class II ma- chines,”noted Kunal Mishra, vice president of product management at Cadillac Jack, which currently distributes Class II games in Califor- nia and which has plans to enter the Class III market. “Some of the high-volume locations mix Class II with Class III games,” added Dean Eh- rlich, vice president of sales in North America for WMS Gaming. “This is primarily focused on the higher population areas that have the occupancy to support additional supply as long as their infrastructure can support more games. But the inclusion of more Class II devices to the slot floor is hardly a panacea for Cali- fornia gaming properties looking to satisfy customer demand for a Las Vegas-style ma- chine wagering experience. “Class II games are performingwell below Class III, Ehrlich said.“That’s why the proper- ties are pushing for new compacts so they can expand [Class III offerings.]” One of those operators pushing for a new compact is the Agua Caliente Band of Cahuilla Indians, which operates the Agua Caliente Casino in Rancho Mirage as well as the Spa Resort and Casino in Palm Springs. The tribe currently uses only Class III slots at its facilities. “Right now, we are operating under a 1999 compact,” said tribal press secretary Nancy Conrad. “In 2006 we agreed to a new compact with Governor Schwarzenegger that would allow 1,000 more [Class III] slots at each of our two casinos, with an option for a third casino. That would give us a total of 5,000 slots, pending ratification by the legis- lature.We’re confident that will happen.” Local thinking New compacts or not, machine manufactur- ers stand ready with both Class II and Class III to meet the needs of the California market going forward. What exactly these “needs” may entail still remains very much up in the air, given California’s unique mix of players, games types and properties. Ehrlich, for one, sees similarities between California and the strong locals-oriented markets that exist elsewhere in the United States.“The California market’s best-perform- ing games are primarily video/free-spin ori- ented product,” he said. “I would compare it to markets in the Midwest that are also heavy free-spin video.” “Video progressives are very hot,” add- ed Aristocrat’s Johnson. “All major gaming floors will have a number of progressives on the floor. Mystery progressives are also very popular. Cadillac Jack’s Mishra also noted video’s popularity on the California gaming scene, but even here, Golden State players show a contrarian nature. “The way demands differ in the California market is in the video slot machines,” he said. “In part, low-denomina- tion, high-maximum bet games are extreme- ly popular. Cadillac Jack makes games available tai- lored to customer needs. We get the most traction in low-denomination, high-maxi- mum games by tailoring pay tables specifi- cally to the market.” “Every market is unique, and needs local- ization,” Mishra added.“They have their own needs for denomination changes, new cabi- net styles, the interface system.We go in with the mindset that we’re going to localize the product to the needs of the market. Bally’s Prater agrees that local play great- ly influences California casino game choices, but believes this dynamic is evolving. “The California market can be described primar- ily as a ‘local’ type environment,” he said.“As such, players demand games that provide seat time and gaming value. Yet the market is on the forefront of what we refer to as ‘true gamblers.’This player wants to wager in large amounts, and truly appreciates the volatility swings associated with gambling.” Serving the future Oneway to quickly and efficiently tailor game types to such a disparate pool of players is to adopt server-based games, a fact not lost on casino operators. “Although a few years out, serverbased games hold the most potential for growth and new and exciting slot product,” said Da- vid Fendrick, chief operating officer for the Agua Caliente Band of Cahuilla Indians and its two casino properties. Indeed, some operators have already in- stalled the nascent technology, such as Bar- ona Valley, which currently has 48 IGT server- based games on its floor. “Server-based is one of the things you really sweat at the outset and it turns out to be a major non-event,” said Hickey.“We sold it at the beginning as a nickel game that can covert to penny play. What we did was in- stall nickel and other multi-denominational games that, on weekdays, would allow pen- ny play. We explained to people that table games have been doing this forever, that they change the bet minimums from week- day to weekend, and by hour. Mostly the re- action was,‘Oh, OK.’” Hickey likes the potential of rapid re- sponse to customer demand. “We added the ‘Russian Treasure’ game eight to 10 months ago. Normally you try a couple of games, and if it’s popular,you order a fewmore and install them a fewweeks later.With server-based,if a game is hot, you can move instantly to meet player demand. You can customize the floor on demand.” Manufacturers, well aware of this even- tual move to server-based machine technol- ogy, are taking pains to make certain their of- ferings are a step above the competition’s. “In technology, we’re on the cutting edge with our server-based solution,” Mishra said. “The technology is established in other mar- kets. It allows our clients to change a game on the fly, without the laborious process of changing chips. It allows them to see and un- derstand the metric behind the games. Rath- er than having to use a standalone connec- tion, we offer a full Ethernet-based solution. That allows them to operate the games more efficiently, with a full back-end solution.” Tech advances Meanwhile, California continues to be a mag- net for manufacturers looking to establish the latest iterations of more traditional slot machine technologies. For example, WMS has rolled out some of its latest product in California, and Ehrlich said the G-Plus series of video slots and WMS’ five-reel mechanical games have been particularly successful. “The G-Plus interface is different for sev- eral reasons—the reels are 25 percent larger, the win celebration is unique and differenti- ated and the volatility of our math models are more conducive to the California/higher volatile market,” Ehrlich said. “Our five-reel mechanical games, initially our ‘Hot Hot Super Jackpots,’have also been successful.The extra side bet on the mechanical reel product has done quite well increasing the average bet.” He also pointed to “Monopoly Big Event,” which features a separate server linking ma- chines to a community bonus round, as an- other new WMS product doing well in Cali- fornia. “There’s a separate random number gen- erator for the bonus event incorporated in our signage,” Ehrlich said. “It’s a completely inde- pendent game that seeks eligibility from the group of players at the bank and determines outcomes based upon wagering. In a nutshell, that’s how we view server-based technol- ogy, differentiated game enablement and not Barona Valley Ranch Resort & Casino is among the handful of properties in the US that currently utilizes a server-based gaming system. A