The recent news of layoffs of seven percent of IGT’s worldwide workforce underscored the challenges that all game manufacturers are facing, particularly those who are trying to defend and grow their share of a North American replacement market that is clearly in a retrenchment phase.

One outcome has and will be supplier consolidation, to listen to those who follow the industry on the financial side. There were two major deals along those lines last year; the Bally/SHFL combination and WMS and Scientific Games. Scientific Games’ fourth quarter FY2013 earnings call afforded a useful view of merger logic as well as strategies that can take some of the sting out of current market realities.

“In the U.S. regional markets, the trends appear to be challenging, with [January and February] showing larger declines compared with the prior year,” said David Kennedy, president and CEO. “This trend is leading our customers to be more cautious about spending capital to refresh their slot floor. In addition, the competitive landscape continues to be a challenge.”

 As a result, the company has taken actions to broaden its product base, expand its geographic reach and further penetrate markets so that it is not as dependent on revenues from the North American replacement market. “We recently took over direct sales in both Australia and Peru from our distributors and we are expanding our game development studio in Sydney to provide unique game content in the Australian and Asian markets,” said Kennedy. “Further, we’ll identify and invest in other new opportunities for gaming expansion around the world to insure we capture our fair share of the revenue.”

On the cost savings side, Jeff Lipkin, executive vice president and CFO, said the company expects that it will be able to achieve at least $60 million in run-rate cost synergies by the end of this year, and it is on track to achieve $100 million in cost synergies by the end of 2015.

The benefits on the revenue side will, as they always do, take longer to realize, but they are not hard to identify. Scientific Games is composed of three groups; lottery, gaming and interactive, and this makes the company highly attractive to licensors such as Hasbro, whose brands include Monopoly. In an announcement earlier this year, Hasbro expanded its existing deal to new channels of trade, more brands and more geographical territories.

“Licensors like to do business with you when you can distribute and promote their brands across a number of different channels with a larger footprint,” said Kennedy. “That’s one of the benefits of the combined company.” The same multi-channel logic applies to any game content, such as deploying WMS content on Global Draw betting terminals, which is happening now.

On the core slot business, Scientific Games is very focused on the premium WAP side of the participation games business, where the company has scored some notable successes; with its WAP installed base increasing almost 500 units and reaching 3,817 games, a record level for WMS. 

“The growth in our installed base of WAP games reflects the continued strong performance of our Gamefield xD cabinet for which we now have five titles in the field and expect to launch our new Beetlejuice game on the platform in the June quarter,” said Lipkin.

On the interactive side, Williams Interactive launched its second social gaming application, Goldfish Casino, which complements its first and highly successful game, Jackpot Party Social Casino, which consistently ranks among the top 5-10 most popular social casino applications on Facebook, IOS and Android. Within the real money gaming business, it is now live with 11 operators across Europe and expects to continue expanding, including in the U.S. with the regulated jurisdictions of Delaware and New Jersey.