California casinos have become prime proving grounds for the latest slot advances
As a large, growing and vibrant casino market, California has become something of a bellwether for electronic gaming manufacturers.
“Games that enjoy success in California typically enjoy great success across the country,” 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 direction the industry as a whole is heading.”
“California usually has the benefit of getting games before anyone else in the country due to faster approvals and closest shipping locations,” added Brad Johnson, vice president of marketing for Aristocrat Technologies. “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 potential 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/ticket- out,” he said. “California was originally ticket only, but just with ticket-out. Then Class III gaming came in and some saw it as a panacea 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 Consultants, said that in 2005, California casino revenue grew by 21 percent, increasing to $7.2 billion as opposed to $5.8 billion in 2004.
Nearly all that growth was incremental revenue 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 gaming. California is bringing the gaming closer to the customer.
“There’s a good amount of growth forthcoming, 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.
The primary concern for casino operators and game manufacturers in the California market remains the yet-to-be-determined new standards for Class II gaming machines being considered by the National Indian Gaming Commission. There is fear that the new standards could slow down Class II game action, which would ultimately make the devices less profitable. That’s a problem in California— a hybrid market, where even some Native American casinos that have Class III compacts use Class II gaming machines. 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 machines,” noted Kunal Mishra, vice president of product management at Cadillac Jack, which currently distributes Class II games in California 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 Ehrlich, 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 California gaming properties looking to satisfy customer demand for a Las Vegas-style machine wagering experience.
“Class II games are performing well below Class III, Ehrlich said. “That’s why the properties 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 legislature. We’re confident that will happen.”
New compacts or not, machine manufacturers 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-performing games are primarily video/free-spin oriented product,” he said. “I would compare it to markets in the Midwest that are also heavy free-spin video.”
“Video progressives are very hot,” added 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-denomination, high-maximum bet games are extremely popular.
Cadillac Jack makes games available tailored to customer needs. We get the most traction in low-denomination, high-maximum games by tailoring pay tables specifically to the market.”
“Every market is unique, and needs localization,” Mishra added. “They have their own needs for denomination changes, new cabinet 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 greatly influences California casino game choices, but believes this dynamic is evolving. “The California market can be described primarily 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
One way 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, server-based games hold the most potential for growth and new and exciting slot product,” said David Fendrick, chief operating officer for the Agua Caliente Band of Cahuilla Indians and its two casino properties.
Indeed, some operators have already installed the nascent technology, such as Barona 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 install nickel and other multi-denominational games that, on weekdays, would allow penny play. We explained to people that table games have been doing this forever, that they change the bet minimums from weekday to weekend, and by hour. Mostly the reaction was, ‘Oh, OK.’”
Hickey likes the potential of rapid response 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 few more and install them a few weeks 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 eventual move to server-based machine technology, are taking pains to make certain their offerings 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 markets. It allows our clients to change a game on the fly, without the laborious process of changing chips. It allows them to see and understand the metric behind the games. Rather than having to use a standalone connection, we offer a full Ethernet-based solution. That allows them to operate the games more efficiently, with a full back-end solution.”
Meanwhile, California continues to be a magnet 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 several reasons—the reels are 25 percent larger, the win celebration is unique and differentiated 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 machines to a community bonus round, as another new WMS product doing well in California.
“There’s a separate random number generator for the bonus event incorporated in our signage,” Ehrlich said. “It’s a completely independent 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 technology, differentiated game enablement and not technology for the sake of technology.”
California players, said Bally’s Prater, are receptive to new technology, making it possible for Bally to have a big splash with its five-reel stepper slots as well as the new seven- reel wide-screen video games.
“California is one of the most progressive markets in the country and popularity trends can start there and move across the country,” Prater said. “Bally has done a good job of advancing the popularity of high-coin five-reel steppers in California and now with new seven-reel video slots. As a general rule on video, the more lines the better. Players have a tendency to cover all lines when playing, even if they are not betting max.
“Another evolving wagering option taking off in California is the ‘set wagering’ game,” Prater added. “What this means is that the player will no longer be concerned with the number of lines or coins per line. Instead, a simple button panel consisting of fixed amounts, 30-60-90-120-150 for example, will simplify the choices for the player.”
Even Prater seems taken aback at the success of Bally’s five-reel steppers in the California market. “[We’ve] sold hundreds of these slots in [Northern California] over the past two years or so and have yet to do a single game title conversion, which is remarkable,” he said.
“This clearly speaks to the quality of the math models incorporated into the game, as well as the game’s overall player appeal.”
Meanwhile, in Southern California, low-denomination video slots continue to rule the roost, according to Aristocrat’s Johnson. “Any of our library of video slots, 9- 20- 50- 100- line and ‘Reel Power’ games with free spins and win multipliers, seem to set the performance barometer,” he said. “Penny and nickel video are now the major denomination on the floor with some floors up to 38 percent penny.
“The video-to-stepper ratio was 60 percent/ 40 percent video in 2001. Today, most floors are 70 percent/30 percent on average, with more than five floors in Southern California that are 80 percent/20 percent.”
No doubt other opportunities will present themselves as regulatory questions are answered and the market continues to grow.
“The market,” said Meister, “is nowhere near its saturation point.”
By John Grochowski. Reprinted with permission from International Gaming & Wagering Business magazine
John Grochowski is an Illinois-based reporter and freelance writer.
The Monopoly Big Event bonus slot from WMS Gaming