For those keeping score at home, this is only the latest salvo in the casino vendor community rush to become larger, more diverse gaming suppliers. The opening round was fired roughly a year ago when Bally Technologies bought SHFL entertainment for $1.3 billion, instantly adding a diverse line of table game offerings to its product mix and inroads into Asia for its slot department. Bally continued to be in buy mode this summer, purchasing online social casino provider Dragonplay for $51 million, and opening yet another new channel for its games and services.
Aristocrat Technologies has also hit the purchasing trail hard, recently announcing a $1.28 billion deal to bring Video Gaming Technologies (VGT) into its fold. The company also announced the purchase of Paltronics for an undisclosed sum of money. These deals essentially open the domestic Class II gaming and table game supply markets to Aristocrat.
The past year has also seen the $1.5 billion purchase of WMS Gaming by Scientific Games, giving the international lottery company greater access to the North American slot machine market through WMS, and the online gaming realm through WMS Interactive.
The desire driving these combinations is simple; the gaming suppliers’ need to grow by adding new channels of distribution, and gaming operators’ desire to deal with more diverse companies that can handle all their product and technology needs anywhere in the world. So long as this dynamic continues, expect merger activity to continue in the vendor space, as companies look to quickly grow to keep up with the Joneses.
Meanwhile, in an odd juxtaposition, the opposite seems to be happening when it comes to U.S. casino development, where the trend is heading toward smaller being better. Indeed, compared to the megaresorts of the previous century and the massive integrated casino resorts currently being developed throughout Asia, the scale of new domestic casinos is somewhat modest. This could very easily be a reflection on the growing oversaturation of the U.S. gaming market and lack of large-scale, greenfield casino development opportunities (potential casinos in New York City and Miami aside).
Still, this does not explain the growing popularity of boutique gaming properties in Las Vegas and other communities. One such property is SLS Las Vegas Hotel & Casino, set to open this month on the former site of The Sahara Hotel & Casino with a modest 50,000-square-foot gaming floor and 1,600 guest rooms. Similar projects for Las Vegas are in the pipeline. So while some casino developments may be smaller due to market conditions, others are undoubtedly being downsized to suit consumer demand for a more intimate and exclusive resort experience.
All of which means we are going to once again see the classic business conundrum be played out—as a company, is it better to be small and nimble or large and powerful? Gaming suppliers and operators have tried it one way for a while, I guess now they are going to see what life is like on the other side of the fence.