Pre the financial meltdown every major slot supplier in the industry was espousing the superiority of their version of “Down Load”. Operators were told it meant the replacement of existing slots, but the benefits of yield management (changing the return to player and denomination at will) would easily compensate for the Capex of new boxes. Although a venue may have a cap on the total number of machines, the efficiencies of having the optimum floor mix for the time of day was very attractive. Most venues are set up to optimize their peak periods, it’s the off peak where there is opportunity to improve occupation and yield.

Along comes the contagion and where are we with the download story. Clearly the three major operators of slots in the US - Harrahs, Stations and MGM are feeling the pinch. Large Capex expenditure on gaming equipment isn’t just off the agenda …………it’s gone.

The thoughts of replacement cycles in the US will start to emulate the Australian experience where the average life of a Slot Cabinet is now out to 15+ years, making it a tad hard to forecast and remove any sort of upturn for the slot industry in the near future.

As US operators back off expenditure on cabinets it’s highly likely they will experience what their colleagues in Australia did - no change in overall net performance of the gaming floor. Just keep changing the games out regularly and realize that a cabinet is nothing more than a vending machine enabling and facilitating the supply of content to the player, scary but true, operators will realize how to save the Capex without any pain. Could we see cabinet replacement in the US go out to 10+ years? What sort of woops will this put into Slot Supplier budgets. Add to this the great disruptor coming into the Industry, “Common Platforms”. Historically suppliers have always been OEMs (original equipment manufacturers). This was mainly bought about by Regulators insisting on strict licensing and testing requirements for gaming suppliers and the need to supply and validate source codes to all regulators was part of the licensing process. Constant iterative innovation now sees the current slot cabinet made up of the following components. Mother Board (PC), bill validator, LCD screen(s), ticket printer, looming (wire connectors), mid trim (button panel) all housed in a steel cabinet - so what makes anyone supplier’s cabinet different……….. very, very, little now.

The uniqueness rests in the main board and obviously the content provided. Where is the disruptor in this ???. Well it’s very similar to what Michael Dell must have spotted years ago when he noticed a plethora of PC suppliers all OEM, none really providing an open platform for wide ranging content supply. I’m sure a small amount of research led him to the truth …….users weren’t concerned about the make of their PC ……did it operate Windows??? Was it fast??? Was it reliable???…….and did you say cheaper and, and, and……… the rest is now history.

The same can now be said of the gaming space, somewhere there is a supplier who is looking at the $10k plus cost of cabinets and thinking “the player just wants content, what if I produced a good cabinet that’s fast, that’s reliable…………….and much cheaper????????. What if I produced a range of cabinets fat, skinny, tall, round, sit down, stand up, wall mounted, bar mounted??? What if I say to operators just tell your Slot suppliers to provide their PC!!!! and their content!!!! Is this possible??? Emphatically YES. Can it really happen???? - I believe in this environment it’s more likely than ever.

Replacement cycles are now finding new levels forcing gaming suppliers to replace so called lost revenues, they will do this through an increase in their software content offering. We are not talking about if ………just when

Date Posted: 07-Mar-2009

Steve Parker
Parker Management
tooparker@gmail.com
+61414495801