Chief executive officers are always interesting to listen to because, whether you agree or take issue with them, what they say matters. They’re also focused on the bigger picture, so running a four-month-old conversation in the pages of this magazine is just fine, when the talkers are Jamie Odell, CEO of Aristocrat Technologies; Patti Hart, CEO, International Game Technology (IGT); and Ramesh Srinivasan, president and CEO, Bally Technologies.
That was the group that came together for a roundtable session at G2E last fall to tackle a broad range of questions on the slot business, now and going forward. Readers will note general agreement on the looming pre-eminence of mobile delivery systems, the need to attract younger players and the types of changes we’ll be seeing on the floor in coming years. But these are different companies led by people with different backgrounds, and the identity of each shows through. All of which makes for a good read. With no further ado:
The impact of online and mobile technologies on the slot business:
Odell:The gaming experience is going to become so dynamic via tablets and mobile devices. The floor will become more dynamic as well. To me, that’s going to mean bigger hardware; fancier ways to keep the player engaged and playing the game. We will be doing more of what we’re doing now: aggressively spending R&D money to make the games faster, more powerful and more interactive and with more features.
Hart: The gaming industry is a content consumption business and it will be similar to other content consumption industries. There will be a multiple-platform consumption model that really merges together, which is the same way we all consume content today. As you find industries moving to multi-platform consumption models, it really strengthens every platform; you’re not over-indexing any particular one. How those platforms come together and how consumers move from platform to platform and what they find to be inspirational about each platform is how we think about the industry.
Srinivasan: We have three major responsibilities at Bally; technology provider, content provider across all channels and a responsibility to continue to innovate in all the areas that our customers want us to innovate, which includes land-based casinos. We are working hard to connect all this together as well as provide a single view of the player, whether they play at the mobile, online or land-based casino. IT’s a focus of our systems division as well; enabling through technology to provide content through every channel and continuing to innovate on all of them.
How to address demographic changes and broaden the appeal of slot games:
Hart: The move to new and younger demographics is not a new thing for the casino industry. I think it may be different this time because the new demographic coming up is trained differently. They are social media consumers and about 45 years old is where the line is for the pre- and post-video game generation. The generation coming up is more accustomed to gaming and having gaming be part of their daily life. So it might be a bit different, but it’s an evolution, not a revolution, as you move from one age bracket segment to another. And I think it will take all of the things that younger demographic gets up every day and embraces; it’s communal, social, video and mobile. That can be done very easily in a casino environment by augmenting it with new forms of engagement that we believe will appeal to a younger demographic. There’s a long list; it’s not one thing. We need to think about our brands, which ones are we marketing and are they relevant to a younger demographic? We have to think about the immersive experience with the machine; is it a rich media immersive experience that appeals to the younger demographic? In walking the floor here, you see that every manufacturer is thinking about these issues.
Srinivasan: We don’t see things changing too rapidly. Yes, it’s changing, but all of a sudden, most of the people in the casino are not going to be less than 45. But we do understand that the 45-year-old person in 2015 will be very different than 45-year-olds in 1995. Change needs to be gradual. Some of the quantum leaps of innovation that we have tried have not worked out too well in terms of providing good performance on the casino floor. The process of innovation has to be continuous. There are a whole lot more things we need to do technologically. We have to make games more interactive; things like consistent state and perceived skill will become a lot more interesting. As we continue to borrow technologies from the mobile and online space and connect them to social media, all that is a continuous process of evolution.
Odell: I look at it two ways; first is content, second is technology. Content on the floor is changing and the changes come from our understanding of player demographics; the content has to be relevant. With technology, the younger generation does not do one thing at a time; it’s three or four things. In the future when people are playing a slot machine, they’ll also have a phone hooked up to their ear talking to someone. One reason to be bullish is because the first time you have a chance to communicate with a generation of future players is outside the casino and the experience inside the casino is gaming on steroids, with lights, sound, music and restaurants. The ability to market early to these customers is enormous.
The impact of the continued growth of participation games, on manufacturers and operators:
Srinivasan: For us, it is about being ambidextrous. It is about focusing R&D and innovation on the core areas that our customers depend on today as well as the new areas; not losing sight of one versus the other. When you think of our innovation focus on all areas, gaming operations is one of the areas. I don’t think it is more or less difficult than it was years ago. The bar has always been high for gaming operations. For us as an engineering-focused company, it is about increasing R&D in all the core areas, including gaming operations.
Odell: I don’t see the pie getting any bigger. I think it’s excitingly competitive. The games are getting better and better and I think the trade has been very well served by manufacturers in what we’re seeing on the floor. For us, we are a little behind in this area because in Australia we’re not allowed to place games in participation, so we get a little bit of a pass in this area. Frankly, it’s going to continue to be highly competitive. You’re going to have to take other games off the floor and to have that to happen you’re going to have to build better games. We’re not expecting any free kicks from casino operators. They’re just there to make dollars and cents so you’re always going to have to support that with better games and better licenses.
Hart: The only thing I would add is that gaming operations are truly a unique business models because it truly does put you in partnership with your customers. You are amazingly aligned; you want your product to be more successful because it makes them more successful. There’s always the argument whether it’s incremental revenue or it’s just moving around the floor. So I think that’s our challenge; to create immersive experiences that players really value and that they value differently than other parts of the floor. The bar is higher for gaming operations games and that’s why you’re seeing so many brands out there. It’s a different business model that has to be treated differently, in the way that you think about product development, marketing, floor placement; it’s more of a consultative process.
Views on games and systems convergence and what it means:
Srinivasan: I personally don’t think there has been a major convergence. Games and systems are two essentially different kinds of businesses. Games R&D involves a very creative process and new ideas. It’s a very different dynamic than systems, which is a little bit more of a mundane and grinding kind of R&D. The implementations are different, too. Every implementation is a new challenge in systems, while games is pretty much plug-and-play everywhere. But there are a lot of good ideas and techniques we can borrow from systems to make our games better. Persistent state gaming is a classic example. There are a lot of system-type features we can bring in to make our banks of games a lot better. And there are a lot of games ideas that we borrow from systems. The two can learn from each other.
Odell: There is a transition going on here. I don’t see the U.S. going into server-based gaming whilst that was talked about. You’ve seen operators working with banks on networks and I think that works very well. There has been some good crossover with Media Windows, games within a game, bonusing modules, and tournament systems. We’re not fundamentally changing the slot machine. I think we’re going to quickly move to wireless and mobile solutions which will slip past server-based gaming. We’re all working on that. The system has had a short-term role to be accretive to the slot machine, particularly in the player loyalty area. But I think that within the next five years we’re going to move into the mobile arena and wireless solutions on the floor and that will enhance gaming. You’ll be able to dynamically interact with an individual, a group of individuals on the floor or with the whole floor.
Hart: I really think there is integration with the system and the game and that comes from the fact that they share the same display device. Your slot machine at the end of the day is a display device; your system uses that, you send communications, update, provide points, picture-in-picture in your game using the same display device. Where today they are integrated, in the future they may be different. The trick is to make certain that you’re not robbing Peter to pay Paul, that you’re not using too much of your display device to activate your system enhancements and vice versa.
Srinivasan: To be clear, we have two responsibilities at Bally. Our systems have to work well with all the games on the floor. We don’t have that responsibility as a games vendor. So as a systems vendor, we cannot do anything special that utilizes our game operating system, because then we put pressure on the operator to make that work with all the manufacturers they buy games from.
Explanations as to why the U.S. lags on the server-based gaming front:
Hart: I wouldn’t call server-based gaming a failure. It probably has 10 percent penetration in the U.S. market and most people would be delighted with that number if it applied to one of their products. I think the server-based model has been accepted, but it hasn’t been exercised. Now you have this infrastructure for storage, delivery and content. You store content somewhere, be it in the machine, the server or the cloud, and you’re delivering it through some mechanism or device, which might be mobile in the future. Over time, I think the content will be stored further and further away for economic reasons. It’s about a distributed model and how you reach many devices from one storage location. When I look at the server-based model today, we’re very happy with its success, but I don’t think about it as server-based in its rawest form. I think about it as distributed gaming and I think it will be exercised over time when the economics and regulation lend themselves to more of a distributed model and when the industry adopts open standards that allow every device to interact.
Odell: I think server-based gaming works in street markets, but I don’t think it’s very relevant in the bigger U.S. casinos. When I say server-based I mean one server across the whole floor. Multiple servers give the casino the diversity it needs. Five different servers, for instance, support different needs and different suppliers. And, as I’ve said, I think server-based gaming will very quickly move to a discussion about wireless.
Srinivasan: In my mind, this is not Monday morning quarterbacking; we’ve said this on Saturdays as well, server-based gaming didn’t take into account a bunch of things. Number one: economic viability. We are all single-industry vendors. There’s only so much R&D and revenue that we have. We are going at the speed that business allows and we are moving as rapidly as we can. We are never going to have the kind of standards that Apple and Microsoft have. Some of the models being talked about here work very well when the systems, the server and the all the games come from one vendor. But the reality is the games come from different vendors and if you look at the age of all of the games, they range up to 10 or 15 years. There are new games, old games, new technologies and old technologies—all of which need to generate revenue for the casino. All of these things were not taken into account because we were trying to force an artificial replacement cycle.
Another important reason is there is a game side to server-based gaming and a system side. The game side includes downloadable content, and that’s progressing reasonably well. All of us are using the same standards. But the future will depend on our ability to look at games separately. The system side, doing floor-wide gaming events, has gone a very long way in the last two years. You don’t do a tournament across 4,000 games without server-based gaming on the system side.
Opinions on where the slot floor will be five years from now:
Srinivasan: The slot floor is going to look a lot more modern five or 10 years from now, but it’s not going to be fundamentally or vastly different. There’s going to be a lot more technology built in. The level of customer service and the ability to manage a casino is going to be multiple times higher. The casino will be able to recognize your likes and dislikes, whatever device you are using. There is going to be a lot more modern technology and the slot floor is going to be able to do a lot more fun stuff, both for the employees and for customers. But I don’t see the look changing that much. Operators are still going to look for great diversity on the hardware side, and in brands, software, graphics and titles.
Odell: Casinos that get the technology right are going to have a fantastic future. There’s going to be a natural evolution. The floor will be more dynamic, there will be more service and more fun and our companies will support that. It will also be more interactive and more connected to the community outside the casino. My sense is that we’re all gearing up for that and spending a lot of money on technology that we’re not getting a lot of returns for right now because the majority of casinos are still not certain about it. Those that get it right are going to see the fact that players can have a virtual casino outside the brick-and-mortar casino and that’s not going to draw people away from casinos; it’s going to pull people in.
Hart: If you look at casinos today compared to five years ago, they look a lot different. There are many more night clubs and dining experiences, more shows and things to do. If you focus only on the gaming floor, though, it has changed in all of our minds because technology has changed; but it hasn’t changed much in the minds of the player. I don’t think the economic environment supports a wholesale change in the casino industry. But I do think you’ll find areas of the casino; those that are near the night clubs, or areas that drive the younger demographic, changing. Generally speaking, the people who are playing in casinos now will still be playing five years from now. We have to support those players as well as the new players coming up.