It’s been three years, but Illinois has finally taken the plunge into its brave new world of video gaming at bars, restaurants and fraternal organizations.
The 2009 Video Gaming Act authorized up to five betting terminals per licensed location, with the expectation that there eventually would be thousands of sites. No site may have more than five games, and four distinct business segments must be involved in bringing the machines to market-manufacturers, distributors, operators and host sites. In addition, no entity may fill more than one position-a host cannot be an operator, nor may a manufacturer distribute its own games.
The first 65 licensed sites with a total of 278 terminals went live in early October.
“I actually started at this company three and a half years ago, and the first big project that I thought was just around the corner was Illinois,” said Eric Tom, executive vice president for global sales at International Game Technology (IGT). “I literally jumped on it and started focusing on it. So it’s been a big deal for me because personally I’ve been working on this for a long time.”
So has the Illinois Gaming Board, which after the enabling act had to make sure systems were in place to effectively monitor and regulate far-flung locations. The holdup for the last several months has been with fine-tuning a central communications system designed and maintained by Scientific Games International. The system allows for real-time communication with all gaming terminals, monitoring wagers and win while protecting game integrity.
MARKET MATTERSThe games are centrally monitored, but results are not centrally determined. Though some refer to them as video lottery terminals, they are not run by the state lottery, and the games themselves have random number generators as in casino slot and video poker machines. Games are in denominations from pennies through quarters, with a $2 maximum wager and a $500 maximum payout.
The payout maximum required some tinkering with the math on standard casino games. On most 25-cent video poker games, a royal flush with a maximum five-coin wager brings the player a $1,000 return. That’s illegal in Illinois bars and restaurants. And on line-type slot games, play had to be structured to keep an entertaining experience without the allure of a big jackpot.
“All of the games Spielo International is bringing to Illinois had to be re-engineered to fit the Illinois math requirements of a $2 max bet, and $500 max payout,” said Robin Drummond, vice president and general manager, public gaming, for Spielo. “The feel and game play of traditionally distributed play is different from casinos, and this is where our expertise comes in,” he added, pointing out Spielo’s origins in the VLT and VGT market.
Incredible Technologies (IT) took a different approach in accommodating the limits. “Instead of downgrading the math from our casino product, we started from the ground up and purpose built these games specifically with the $500 payout in mind,” said Don Pesceone, senior vice president of sales for the company. “Our slot games will payout the maximum $500 at any bet level. This gives every level of player the chance to cash out big without having to bet the maximum $2.”
There are similarities to the Nevada route operator system, though Nevada operators have neither the maximum wager nor maximum payout restrictions to worry about. Tom compares it to Montana, South Dakota, Louisiana, Oregon and West Virginia, all of which restrict sites to a small number of games.
“The one big difference you’re going to see in these games being regulated is that they pay out a certain minimum percentage,” said Brian McGill, an analyst who tracks the gaming industry for the financial services firm Janney Montgomery Scott. “What you’re actually going to see is the perception that players are winning quite a bit while they weren’t on the gray market games. That should actually spur higher play levels than the estimates we’ve seen previously.”
One further challenge is that casinos remain illegal in the City of Chicago, and hundreds of municipalities have opted out, refusing to allow the games in their bars and restaurants. Cook County has banned the games in unincorporated areas, and 150 municipalities within Cook have opted out.
That makes it difficult to get a handle on just how large the Illinois market will be, with estimates of up to 50,000 games. McGill comes in on the conservative side.
“I would think the expectation would be more like 20,000 without Chicago,” McGill said. “That’s a ballpark number that’s a little hard to gauge because you have no idea how many establishments plan to move forward and if they do, how many games they’re going to put in. Whether they’re on the low end with three or at the maximum with five is a substantial difference.
“We’ve always thought of it around 15,000 to 20,000, and then if Chicago ever does move into it, you would almost double it from there and move into 30,000 machines. That could be conservative.”
MANUFACTURER MACHINATIONSEven at the low end, it would be a quantum leap in Illinois, which limits its 10 casinos to a maximum of 1,200 gaming positions per license, table games included. The Illinois Gaming Board’s September 2012 report showed 11,287 electronic gaming devices in the casinos, a fraction of the potential bar and restaurant market. That opens up a wealth of opportunity for manufacturers, and not just for game makers.
“With large numbers like that it has lots of attention from Suzo-Happ and all electronic game manufacturers,” said Tom Happ, executive vice president of Suzo-Happ. Suzo-Happ’s SafeCash vault/redemption system will be used as a behind-the-bar solution for ticket redemption, which Illinois sites will be using instead of stand-alone cash redemption kiosks. SafeCash enables age verification and allows the bartender to verify that the ticket is an original, not a copy, before dispensing cash.
Game manufacturers, meanwhile, have made a big push to line up distributors and operators. IGT, Bally Technologies, WMS Gaming, American Gaming Systems, Spielo International, Aristocrat Technologies and Incredible Technologies are all vying for pieces of a potentially very lucrative pie. All are offering multigame touch-screen machines, where players can choose from a selection of slot and video poker games. A facility with the maximum five machines still could give its customers a choice among dozens of games.
For WMS, with corporate offices in Waukegan and its main technology campus in Chicago, and IT, with its home in the Chicago suburb of Vernon Hills, the market is home turf. IT also feels at home in the bar and restaurant locations, with its Golden Tee Golf amusement game having been a megahit in those environments.
IT is offering a slot machine version of Golden Tee on its Magic Touch machines, which feature 30 video poker and 10 video slot games. “What makes our games unique in this market is that our video slot math models were built specifically for Illinois, allowing the max jackpot of $500 at every bet level, and that we feature a slot version of the most successful Illinois tavern video game to date, Golden Tee Golf,” Pesceone said.
“WMS has deep roots in the Illinois market dating back to the 1940s with pinball and amusement devices,” said Steve Angelo, WMS vice president of VLT operations. “We have been designing and manufacturing gaming devices in Illinois for the global marketplace since 1992. We partnered with Betson Midwest, a local and leading distributor of coin-operated amusement equipment, to provide the best in WMS products and service to the Illinois VGT market.”
Oklahoma City, Okla.-based American Gaming Systems (AGS) isn’t local, but made an acquisition to appeal to an Illinois audience by purchasing the Cherry Master brand, a favored staple among the gray market games.
“We have taken that concept and that theme and turned it into a game that can be played under the current rules,” said Paul Lofgren, AGS vice president of sales and business development. “We’re giving players the game that they’re used to, but at much better odds much more in their favor. We have state-of-the-art technology and a state-of-the-art platform, but with a very traditional type game.”
Working with its distributor, AG&E, Spielo International is offering two cabinets: the prodiGiVu upright and the VuSlant slant top video gaming terminals. Both will offer the same 12-game lineup, offering a mix of poker and three- to 20-line reel games.
“Over the past three years, due to a combination of player validations and on-site research, we think we’ve determined the right mix for the Illinois market that players are going to love,” Drummond said. “We’ve transferred some of our top-performing games such as Big City 5’s, The Wild Life and The Big Easy from other markets. We’re also excited about Cherry Chests, a classic nine-reel, eight-line game that we’ve developed specifically for Illinois.”
Bally Technologies has announced contracts to bring more than 4,000 VGTs into Illinois; including a variety of ALPHA 2 Pro V22 and Pro V32 titles in a multigame configuration, including iconic Bally games such as Blazing 7s, Quick Hits and Playboy.
“In addition, Bally has signed several contracts for our systems technology within the state,” said John Connelly, vice president of business development for Bally. “Bally systems offerings will provide local operators with an array of tools to monitor their assets and utilize this date to again maximize revenue.”
Aristocrat Technologies is bringing its MAV500, Viridian, and Crown Slant into the Illinois space, all featuring the company’s newest game platform, the Gen 7.
“Aristocrat’s success in the U.S. video market is a direct result of the proven math models used in our themes. Aristocrat has been able to transfer these profitable math models to the Illinois VGT themes with very little change. Aside from the betting and payout limits, players will enjoy the same base game play and ‘Featured Spin’ bonus rounds with minimal differences from the casino versions.”
Meanwhile, IGT is bringing to its multigame format a mix of current slot titles such as Golden Goddess, Black Widow and Dangerous Beauty; longer-term popular games including Wolf Run, Cleopatra and Texas Tea; and video poker games. IGT incorporates a wheel-spinning bonus-not allowed in the Illinois Gaming Board’s original regulations but later approved-in Kitty Glitter and Cats.
“If an operator decides they want a mix and match of new casino games, traditional casino games and tried-and-true VLT kinds of games, they can make that choice,” IGT’s Tom said. “We have as many as 40 games within each subset; which means that on each slot machine, you can have up to 40 games. The operator chooses the subset of games, and then players choose which game to play.”
If Illinois is a land of opportunity for operators, there’s also the opportunity for the state to create something special, AGS’ Lofgren said.
“I think it’s a great opportunity for Illinois to have a state-of-the-art program,” he said, naming analytics, cash management and loyalty programs as well as games as having big potential in the state. “It’s the first time a video lottery program has been introduced in 15 years. Much of the technology in those other markets is quite archaic. The rules are different because the technology was different. Now you have a lot more ability to put in new features that will make this market successful and enhance the market itself.”