FRANK FAHRENKOPF JR.
President and CEO
American Gaming Association
Twenty-five years ago this month, the first issue of Casino Journal rolled off the presses. On that day in 1987, commercial casino gaming in the United States was a nascent industry. Casinos were legal in only two states. Las Vegas was trying to differentiate itself from the new competition by changing from “Sin City” to a family entertainment destination. Riverboat casinos and racinos had not yet entered the public consciousness. And mobile phones and the Internet were still decades away.
A lot has changed in the quarter century since then. Foremost among those changes has been the global growth and acceptance of gaming. In the U.S., commercial casinos can now be found in 23 states and-including direct, indirect and induced impacts-the industry supports spending equivalent to 1 percent of the nation’s gross national product. And some 875,000 men and women are now employed as a result of gaming activity. Internationally, the industry has experienced exponential growth as well, with dozens of casinos opening worldwide during the past five years-notably, throughout Asia and Latin America.
The industry has also seen considerable changes in its product offerings. The industry bellwether of Las Vegas has reverted to its status as the prime adult entertainment center in the world by developing more integrated resorts that offer a greater proportion of nongaming amenities, such as world class dining and shows. Changing customer demands, including input from younger generations, have called for faster-paced options. Casinos now boast the best restaurants, the best clubs and the best value in the entertainment world.
The industry has also embraced 21st century technologies to meet the needs of its customers while increasing efficiency of operations. Casino company loyalty programs have improved tracking of individual customer preferences. On the casino floor, ticket-in-ticket-out technology, multiplayer games, interactive bonus rounds, a linked gaming floor and electronic table games are helping solve problems for operators and deliver unique, entertaining experiences. Additionally, radio frequency identification technology is making it easier to monitor and record chip transactions; it is also making these transactions more secure.
New technology has also made it possible to host games such as poker on the Internet. Unfortunately, the Web sites where Americans are gambling today are run illegally by offshore companies, putting the 10 million to 15 million U.S. residents who visit those sites at risk. We are hopeful Congress will consider legislation this year that could change that situation by amending the Unlawful Internet Gambling Enforcement Act, with accompanying amendments to the Federal Wire Act, which will allow states to license and regulate online poker, following a set of minimum federal standards. Online gambling is here to stay, the only question is whether it will be offered on Web sites operated by reputable companies licensed and regulated as strictly as brick and mortar casinos are today.
If the industry is to continue its success into the next quarter century, it must continue to evolve by delivering innovative products and services. It needs to be prepared for the next frontier of game delivery systems, including mobile gaming, online gaming and more. By leveraging the latest technologies and tools, such as social media, the industry will be able to keep existing customers and attract new ones.
With an increasing number of entertainment options vying for the attention of consumers, the industry’s success will depend on remaining responsive to them. Listening to customers will continue to be the bedrock of what commercial casino companies do.
Much of the industry’s ability to grow in the last two decades of the 20th century was tied to the public’s growing acceptance of gaming. The industry’s commitment to good corporate citizenship through efforts such as the National Center for Responsible Gaming and adherence to a strong Code of Conduct for Responsible Gaming contributed to that acceptance. The industry’s commitment to such corporate social responsibility will be even more important in the future.
In many ways, the same things that made gaming successful in the past will make it successful again in the future. What’s important is that it continues to evolve and reinvent. In 1987, no one imagined, for instance, reading Casino Journal on a laptop or an iPad one day, but the gaming industry welcomed those changes-and looks forward to adapting to whatever the next 25 years brings.
I want to take this opportunity to congratulateCasino Journalon your Silver Anniversary. Running a successful business is never easy, and maintaining that momentum for a quarter-century is a true feat. We appreciate your support and all that you have done to advance the gaming industry.
Looking back 25 years is not easy, and the rapid pace of business change makes it even more challenging. Our industry moves so quickly that we spend most of our time looking ahead as we run towards our next meeting, the latest opportunity, and try to keep our products in pace with the newest technology innovations. But it is a worthwhile exercise to stop, look back and consider how our past has helped shaped our exciting future.
Twenty-five years ago, in 1987, I was in my thirties, living in Atlanta, Ga. Ronald Reagan was the United States President; Michael Jackson’s BAD album was the rage; and most of my friends were talking about Oliver Stone’s blockbuster movieWall Street.
I was advancing in my career with Ernst & Young as a Partner consulting with technology companies. At that time I had no idea I was headed for a career in the casino gaming industry, but I did know that I would eventually leave consulting to pursue a leadership role in a growth-oriented technology company.
And here I am today, CEO of one of the world’s largest gaming-technology providers. The last 25 years have certainly been exciting ones for our industry and for me, with lots changes and, as a result, lots of opportunities. During the first 20 years of the last quarter century, it was not too difficult to be successful in the gaming industry. There was less competition, the casino offered a unique entertainment experience for adults, and the consumer had plenty of disposable income.
Today, things are decidedly different. Tribal gaming, which was nearly non-existent in 1987, is flourishing; with more than 400 Indian gaming establishments in the U.S. Markets like Macau and Singapore are surpassing destination markets like Las Vegas and Atlantic City. As gaming continues to expand, consumers are staying closer to home and yet are still able to get that “destination” experience without traveling hundreds or thousands of miles.
Operators that have been investing in the downturn have gained market share.
It is more important than ever for casinos to upgrade with technology that enables them to compete for the consumers’ limited disposable income and leverage their already invested capital. Networked floors that enable powerful, floor-wide player experiences, combined with new and more interactive slot games, mobile apps, iGaming platforms for free-play or wagering, and games that bridge land-based with social play, are all going to ensure the success of our industry for the next 25 years. Investments in mobile apps and mobile Web sites that offer integration with player-tracking systems will ensure that patrons stay connected to the casino.
Along with greater interactivity and access to gaming at the casino, at home and on the go, consumers are increasingly demanding a much more personalized gaming experience. Just like brick-and-mortar businesses where the consumer’s experience is tailored to their purchasing habits, people expect that when they visit a casino and use their player’s club card, their experience will be customized based on their gender, age, play and spending behavior. In 1987 technology was not available to give such an experience, while today’s consumer views it as exceptional customer service and has come to expect it.
Casinos need to invest in technology that enables them to deliver these experiences, from powerful business-intelligence tools to player-user-interfaces at the game and leading-edge casino-marketing technology that encompasses and transcends the brick-and-mortar casino.
People visit casinos for gaming excitement and to be in a social environment, and so it is important for casinos to upgrade their floors to enable floor-wide community experiences. Social experiences such as floor-wide racing events and slot tournaments add excitement, drive traffic into the casino, increase carded play and compete effectively against other social entertainment experiences.
Technology is the only way to keep pace with rapid change and to improve the cost structure. Gaming has lagged other industries in technology investment in recent years, partly due to high debt loads and partly due to the regulatory environment. But investments in technology today will pay dividends in the future for those savvy operators who see what these new technologies and games can do for their business.
As we look ahead to the next 25 years, the good news is that some things won’t change: players’ desire for a personalized experience, players’ desire for a winning experience, and their desire to be part of a vibrant and social environment which includes the casino and the extended player network of mobile and Internet.
Gaming industry consultant
Seminole Hard Rock Casinos
Twenty-five years has brought a lot of change to slot operations.
Coin, coin acceptors, hoppers, handles are out. Currency, currency acceptors, tickets, spin buttons are in. Change attendants, booth cashiers, carousels, hopper fills are gone. Kiosk, bill changers, ticket redemption, key to credit are here.
Machine changes were easier and slot analysis simpler. It used to be that the slot director was actually capable of doing both since most came up through the ranks, usually from the technical side. Today there are slot analyst with sophisticated methods and color charts that give us the same results. Machine changes are done by some combination of slot technicians, IT specialist, gaming regulators, finance personnel and security depending on the location.
Many slot directors have little or no experience and learn on the job. There are very few that understand all the details of our business. Slot math, use of colors and readability of words in slot artwork designs, traffic flow and placement of games and signage in the casino are becoming lost arts. We have become an industry of specialist; software engineers and game designers who have never been in a casino, outsourcing these important functions to China and India.
A quarter century ago, the highest denomination game at most properties was $1; $5 machines were just being introduced. Today, many casinos have $1,000 bet machines and penny games.
Twenty-five years ago, it was not unusual to see 97-98 percent payback machines up and down the Las Vegas strip. Overall, casinos had an average return of 95 percent. It is now common practice to have a house hold of 9 percent or more. It’s all about Wall Street and stockholders these days, not entertaining the customer.
Cheap room and affordable meals are no longer the norm. Each area must show a profit. No wonder some argue that we have forgotten our roots.
25 years has also brought a lot of change to our slot world.
There were no WAP machines; the standard slot model was three reels with a 25 stop theoretical cycle of 15,625 combinations. Some reel strips had bars and blanks and were called ghost models, others were fruits. Three 7’s on the center line was always the norm and the jackpot. Today there are virtual reels, allowing for theoretical cycles in the millions and beyond. Now machines are four, five, or six reels wide/symbols high. Anything goes for titles or symbols-if you can imagine it, it can be made into a slot model.
Game suppliers pay millions for the use of names of famous people, blockbuster movies, social games or anything else they think will be successful. Then they charge the operators excessive prices trying to recoup their investment.
Hand pays and jackpots, or at least the perception of them, were common. Today they seem to be nonexistent, or at least that is the perception.
Our future will also be full of change. Somewhere between server-based gaming, the internet, and social media is where we will find our opportunities for growth. We will only be limited by technology, immigration and creativity.
We are all using e-mails, Facebook and Twitter for our marketing advantage. Customer’s accessibility to instant messages with smart phones, smart pads and portable computers make them amenable to mass marketing attempts.
Server-based and downloadable gaming gives managers the power to switch game themes, pay lines and denominations. It is a tool that we must not abuse by taking unfair advantage of our customer base. It’s also a technology that still needs a few kinks ironed out, not the least of which is the fact slot machine manufactures do not want to play nice with each other, and communications between them is still stressed. It is imperative that the operators have the ability for all games and systems to easily intercommunicate for casinos to take maximum advantage of downloadable and server-based technologies. Until this happens, progress may be slow in this critical area of our business future.
The past 25 years has brought expansions, mergers and consolidation of casinos not only in the United States but around the entire world. Expansion and consolidation may also be a big part of our game suppliers’ future. We have changed our measure of success from percentage of slot floors to ship share. The only way to increase ship share may be mergers of the big operators or for them to buy smaller operators that are continuing to chip away at their business. There are more than 20 game machine suppliers calling on most casinos.
Through all the changes in the past 25 years,Casino Journalhas been there to document it all. They have led the way in casino reporting. Like our business, they changed and grew always for the better. In their own way they have been gaming’s historian. For this I salute and thank you. Keep up the great work.
President and CEO
Gaming Laboratories International (GLI)
The last 25 years have been incredibly exciting for our industry. Just in the United States-gaming expanded beyond the borders of Nevada and New Jersey; rightful tribal sovereignty brought an expansion of gaming into tribal lands and brought much needed revenue to depressed areas; video slots and bill validators became a new standard; and gaming went Wall Street. Around the world, the developments are almost too numerous to mention with new jurisdictions, devices, and iGaming taking a firm foothold next to terrestrial gaming.
In other words, the last quarter century has been one of tremendous prosperity, and our industry has become a major force for entertainment, employment and investment. Additionally, our top companies have taken their prosperity and have used it to focus on world-changing initiatives in their green, giving and diversity programs.
However, with all of that progress and prosperity, one thing has remained constant: the technology in our daily lives has outpaced the technology in the gaming industry. This is not a new trend-it is one that has plagued our industry for the past 25 years. There are pockets of the industry that have emerged as technology leaders and early adopters, giving us models to follow. However, we have been taught that we need to be much better at closing the gap between the time it takes for technology to be adopted in regular life and into the gaming industry.
A lesson learned from TITO, mobile, cashless and iCloud technologies is that products and technologies that make the operator’s job easier will continue to be winning propositions. Looking to the next 25 years, we need to keep that lesson and understand that we need to get away from proprietary structures and embrace open technologies, so that operators can save money, save time and increase productivity.
One shining example is the lottery industry, which 25 years ago by its own admission was very antiquated. Today, it is the most progressive aspect of the industry, embracing new technologies at a more rapid pace, and converging with the traditional gaming industry to where players have a difficult time discerning when lotteries are running the operation. Additionally, lotteries have paid very close attention to their players. These things teach us that going forward embracing new technologies with the players’ wants and needs will lead to prosperity and longevity.
That leads me to my next point, which is that to operators data is key; to the point where data is more valuable than money. Over the past 25 years, we have seen systems evolve from simple player tracking and accounting to very sophisticated systems that deliver a wide range of matrix and data mining. We are moving in the right direction, and we can learn from the last 25 years that over the next 25 years, suppliers need to be even more mindful that the operators need to be able to go and get that valuable information in an even more efficient manner.
Operators have also learned valuable, sometimes hard lessons, none more succinct than this: just because a casino is built doesn’t mean people will come. Some regional markets have taught us that there needs to be investment in the marketplace to create a total experience that players want.
GLI was created in the last 25 years and we, too, have learned some valuable lessons that will help us moving into the next 25 years. We have learned, and continue to learn daily, that technology is becoming more and more complex. That means that supplier R&D will be even more critical, and that our role as the lab in the next 25 years will grow to be even more involved earlier in the process, helping suppliers understand early on what will work, what will be accepted by regulators, and how we all can work together to get new technologies to the field while maintaining integrity and safety.
Above all, over the last 25 years, the industry has learned that we are a conservative lot, and change can sometimes come a bit slowly. To remain competitive in the larger entertainment industry over the next 25 years, we must embrace our visionary core that made us who we are.
Chairman and CEO
MGM Resorts International
It’s an honor to be a contributor to recognize the 25th anniversary of the publication ofCasino Journal. We have been proud to support our industry’s leading publication and we salute Charles Anderer and the thoughtful staff atCasino Journalfor their ongoing efforts to help our industry to be informed and to continuously evolve to meet the needs of our customers and other stakeholders.
In 1987, Madonna was on her way to being a world class entertainer. Lady Gaga was a year old. The Twins, the Lakers and the Giants were their respective league leaders. President Reagan demanded that Mikhail Gorbachev tear down the wall andWall Street’s Gordon Gekko invoked “Greed, for lack of a better word, is good.”
So, with the benefit of the rear view mirror (where things are always closer than they appear), imagine my trepidation in trying to provide a crystal ball to the future. I’ll try to do so by using the journey we have been on in the last 25 years, with a particular focus on the last five years.
In 1987, MGM was only one year old, having been incorporated in 1986. The genesis of the company followed in 1988 with the purchase of the Sands and Desert Inn resorts. After sale of both resorts, MGM Grand Las Vegas opened in 1993 as a multi-themed destination resort located on 116 acres on the Las Vegas Strip.
MGM Resorts is committed to providing our employees with work and community environments that empower them to excel both on and away from their work stations. We embrace diversity and inclusion because the vitality of our employees is a basis for the success of our company, and the ability of our employees to serve our guests with the utmost level of excellence is influenced greatly well before they leave their home to come to work. As such, the conditions of our employees’ neighborhoods and families are essential in their ability to work together and serve our guests at their very best.
As a leader in the hospitality and entertainment industry it is critical for MGM Resorts to have a knowledgeable and well-educated workforce to deliver the superior quality of service that our guests expect. Supporting our communities’ business, education, health care and cultural sectors increases the pool of trained and educated talent and bolsters our ability to excel at what we do.
In the last year, we have redoubled our commitment to being socially responsible. Not only do we commit to the health of our communities and our planet, but also our employees.
We seek to live our core values of integrity, teamwork and excellence in everything we do. As an employer of choice, we are continuously looking at how we can help enhance the workplace environment-the safety and health-of our employees. As part of this effort, we undertook a full evaluation of dining options for employees (we serve 40,000 meals daily to our employees). We engaged with our world-class food and beverage teams to develop healthy, flavorful and enticing menu options for all employees. I’m pleased to say, it’s a success.
As a leading business that hosts millions of visitors yearly, we also have a responsibility to our planet. With the construction of CityCenter, we have made sustainability a core process that is embedded into everything we do. We have taken practices developed in the construction of the highest LEED achievement of any hotel, retail district or residential development in Las Vegas and woven them into our operations. Using cutting-edge solutions, CityCenter has been able to grow responsibly without sacrificing the quality of materials or the guest experience. In the more than two years since its opening, it has quickly become a venue of choice for conventions, conferences and the leisure traveler.
So, what does the future hold? While the human connection will always be core to the travel and tourism experience, we know that technology will be a driver of the gaming experience. We are hard at work in extending the MGM Resorts brand manifested in our iconic properties to an Internet-based experience. It’s about providing a quality, safe customer-focused experience.
When I talk with employees, customers, vendors-and investors-they want to know how business is going. When I tell them what we are doing to provide an unmatched environment at which to vacation, or to do business at conferences and conventions, they are enthused. What gets them most excited is what we are doing to achieve sustainable growth…. for the next quarter century.
I don’t think anyone could have predicted the level of success that Native American tribes are currently enjoying. It’s mind-boggling to think about the small California bingo halls of the 1980s, and then look at the opulent resorts in Connecticut today. It’s quite an impressive achievement.
The numbers are only the beginning of the tale. Twenty-five years ago, Indian gaming earned just $110 million. In 2011, it produced $27.2 billion in revenue, roughly 40 percent of the domestic gaming industry.
But yesterday’s success doesn’t guarantee tomorrow’s. Perhaps the most important thing tribes have gained from this experience is the political resources and acumen to be heard at the highest levels of government. No longer do we have to go to local, state, or federal offices with hats in hand and depend on the kindness of strangers.
Flash forward a century and a half to the present, when a gravel-mining company tried to open a quarry near our sacred birthplace. Pechanga officials tirelessly worked the phones, the meetings, and the press to tell our story. Our friends in Temecula heard us and halted the quarry, a result unthinkable 10 or 20 years ago and one we’re damn proud of.
We’re players on the national level too. Tribal leaders are attending annual summits and having dinners with President Obama. Smart politicians know that Native voters have decided close elections in swing states, so they’re making a concerted effort to reach them. Reservations are no longer blank spots on the map labeled “Here there be dragons.”
It’s not just the money we’ve made, although that certainly helps. Look at how Jack Abramoff was able to scam tribes in the early 2000s. They had the money but not the wisdom to use it effectively. We’ve grown smarter over the years, which is why tribal gaming is largely untainted with scandal.
We’re still not getting everything we want, but at least we’re in the room. Consider the recent debates over the Patient Protection and Affordable Care Act (“Obamacare”) and the Violence Against Women Act. Both have provisions that would help tribes immensely, so we’ve made it clear these acts are among our top priorities.
Internet gaming is the new Wild West, of course. Once again we face a gold rush that threatens to overrun us. Once again we’re trying to avoid being slaughtered or herded into the hills. For three years Sen. Harry Reid has tried to craft a bill that ignored our needs and wishes. No protection of bricks-and-mortar casinos, no regulation through tribal commissions and the NIGC, no recognition of state compacts or tribal sovereignty. For three years we’ve stood in the doorway and said, “No.”
It’s slowly dawning on Congress that no Internet gaming bill will pass without a major role for tribes; because, again, we’re 40 percent of the U.S. gaming industry with the clout to match. That’s what our newfound political skills have given us: a voice in determining the industry’s future.
Non-executive chairman of the board
International Game Technology (IGT)
It has been 34 years since I had my first assignment in the gaming industry. In July 1978, about 20 days after Bill Harrah’s death on June 30, the Board of Directors of Harrah’s wanted an assessment of the opportunities for expanding Harrah’s to Atlantic City. I didn’t know it when I reached Atlantic City on that hot day in July, but I had arrived in a place that would be the beginning of significant changes for the U.S. gaming industry, for Harrah’s, and for me.
Beginning in 1931, Nevada enjoyed a nearly fifty year monopoly, serving as a southwestern U.S. Mecca for legalized gambling that capitalized on the post-WWII western migration to California and the growth of an expanding middle class throughout the United States. That monopoly came to an end in 1976 when New Jersey entered the fray, passing legislation to allow gambling in the Garden State. Not everybody in the Nevada gaming industry understood the future importance of Atlantic City.
Nevada operators at first had no interest in expanding to Atlantic City, the conventional wisdom was that suggesting creating a desirable attraction in a “year round” destination was the key factor to attracting customers. But with the launch of Atlantic City’s first casino on Memorial Day 1978 the landscape changed. Resorts International’s first year of operation was successful beyond all expectations and soon nearly all of the major Nevada operators were scrambling for a spot on the boardwalk.
• It established the portability of the Harrah’s “brand.” Since it was the first Harrah’s branded casino built after Bill Harrah’s death in 1978 it affirmed the company’s ability to successfully replicate the operating style and culture that he had created over a 40 year reign as founder.
• It was very quickly a significant cash flow generator that enabled other expansions and acquisition opportunities for Harrah’s. With Atlantic City’s ensuing success, casino owners, developers, and financiers began to realize that operating a casino within close proximity to dense population centers can be just as lucrative as building a destination attractive enough to bring in customers from afar. Americans had the desire to gamble, and the desire wasn’t exclusive to the Nevada experience.
This would eventually open the floodgates, issuing in a new era of casino expansion as jurisdictions and tribes across the U.S. saw the lucrative opportunities from legalizing gambling. New regulations resulting from the growing markets also helped several manufacturers, like IGT, become a prominent part of emerging gambling destinations and their new products like Megabucks, Video Poker and eventually TITO expanded the consumer market with electronic gaming products that made playing slot machines more entertaining-and appealed to both male and female customers.
In a few short years, a half century old tradition of Nevada dominating the gambling market moved to a national scene of thriving gambling enterprises, with other follow-on industries: financial, supplier, legal and regulatory-and a prominent media community accompanying it as well. A visit to G2E will quickly indicate how far the industry has come in 25 years.
Beyond the impact of expanding legalization, both domestically and internationally, the industry has changed in many other ways over the last 25 years:
• Access to capital has skyrocketed.
• Investor interest, and later private equity interest, has broadened.
• The revenue model has changed dramatically as hotel, food & beverage, retail and entertainment have broadened the offerings, and the customer base. Revenue from the casino is now less than 50 percent of total revenues in most new casinos, it was about 80 percent 25 years ago.
• Industry consolidation, driven by lack of jurisdictional growth and slower overall revenue growth, has narrowed the number of companies that compete as peers in terms of geography and size.
• More new gaming equipment suppliers-many of them non-U.S. based-are competing for fewer capital dollars as new and replacement budgets have tightened during the economic slump.
In my view there are now two dynamics that will significantly change the industry over the next 25 years:
• The need to attract new and younger customers such as Millenials (ages 21-29) and GenXers (ages 30-45) as aging Baby Boomers become a less important economic demographic for the industry.
• Reaching these new and younger customers on their terms, specifically online and on mobile and tablet devices.
The gaming experience is going online, both social gaming (in the U.S.) and legal online gambling in many other parts of the world. While all gaming customers are, to some degree, more tech savvy, the Millenials and GenXers are far more likely to engage in social activities on their smart phones and tablets. Whether the industry can embrace this customer and the changes that this customer will demand will determine its sustainability in the future. One thing is clear: they will not limit their gaming experiences to bricks and mortar casinos.
Social gaming represents a new opportunity to let the customer play a role in the direction of the industry. Earlier this year, IGT saw the growth opportunity in social gaming and acquired Double Down Interactive, a pioneer and industry leader in the online casino space. Other companies in the gaming industry, both traditional suppliers and veteran operators, have done likewise.
So once again the gaming industry will evolve based on access to population-except this time the population is based on millions of users playing social games online every day as their preferred form of entertainment.