Analysts sees closer ties with entertainment, gaming companies

Gary Thompson

Wednesday, Oct. 8, 1997 | 11:07 a.m.

It may not happen overnight, but joint ventures, strategic alliances and a possible merger or two between entertainment and gaming companies are moving closer to reality.

That's the prediction of Prudential Securities Inc. gaming-and-lodging analyst Joseph Coccimiglio in a new research report entitled "Is Las Vegas Becoming Walt Disney World for Adults?"

"If you think a Hilton-ITT merger is big, just imagine if something like this were to happen," Coccimiglio said Monday.

"We don't see this as a 1997 or 1998 event, but probably in 1999 or 2000 as the gaming industry continues to evolve into offering more leisure products. The late 1998 opening of Bellagio will do a lot to help change the perception of the gaming industry."

The report, co-authored by Prudential analyst Paul Patrick, says Las Vegas-based gaming companies "are increasingly relying on large-scale entertainment attractions to draw customers to their properties."

Among those cited are the $70 million Star Trek-themed joint venture between Viacom's Paramount Parks subsidiary and the Las Vegas Hilton, Virgin Group's new megastore in The Forum Shops at Caesars Palace, and talks between Circus Circus Enterprises and Seagram's Universal Studios about a development on the gaming company's so-called "Project Z" site just south of Project Paradise on the Strip.

The report also noted that Kirk Kerkorian, who owns 62 percent of the MGM Grand hotel-casino, recently bought the MGM-UA studios and Metromedia International's entertainment companies and formed a committee to study ways the gaming and entertainment businesses can work together.

The idea, according to MGM-UA Chairman Frank Mancuso, is "to identify and maximize all practical cross-promotional opportunities between the two companies so we can heighten the profile of each.

"MGM is a symbol of Hollywood, one of the most widely known worldwide trademarks," he said. "Las Vegas from its inception has been viewed strictly as a form of adult entertainment. The construction of the new, themed resorts is diversifying that concept."

And those themed resorts are breaking down the wall between the gaming and entertainment industries, Coccimiglio said. MGM Grand's $700 million transformation into a "City of Entertainment" and Mirage Resorts' $1.5 billion Bellagio will accelerate the pace, he said.

Coccimiglio noted that several entertainment companies have invested heavily in theme parks and other attractions in Orlando, Fla. But in Orlando, he said, "people stay in the hotels to see the attractions. In Las Vegas, the hotels are the attractions."

Calling casino gaming a "commodity product -- a blackjack table in Las Vegas isn't much different from one in Atlantic City," Coccimiglio said "the stuff outside the casino floor" is what differentiates Las Vegas casinos.

"Mirage understood this when it opened The Mirage in 1989. We believe the operators that understand this and can provide customers with a creative package of nongaming and gaming entertainment will compete successfully in the future of Las Vegas."

"Hollywood has always been the dream factory of the world," Mancuso said. "And Las Vegas is moving toward that as a themed destination resort."

MGM Grand and The Mirage, who use top entertainers to attract customers, are the most likely targets for pure entertainment companies to acquire or ally with in joint ventures, Coccimiglio said.

Rank Group, while already runs casinos and bingo parlors in the United Kingdom, and Virgin Group, which is seeking land for a hotel-casino site in Las Vegas, are his top candidates to the be first entertainment companies to move aggressively into gaming.

He also rated Viacom and Playboy Enterprises as possible casino-company acquirers, but said Seagram, Anheuser-Busch, Gaylord Entertainment and Time-Warner are longer shots. Walt Disney Co. is adamantly against gaming and unlikely to risk its family-oriented image with a gaming-company acquisition, he said.

One possible stumbling block: "Egos are always a problem when you're merging successful companies, and that could be a consideration here," he said.

The report compared the Las Vegas and Orlando markets, and concluded Las Vegas attracts more affluent visitors, offers cheaper air fares and less-expensive rooms.