Casino slot mix debated

Gary Thompson

Wednesday, Sept. 23, 1998 | 11:07 a.m.

The battle over the gaming industry's "participation games" is heating up.

An executive for the world's biggest slot-machine manufacturer, International Game Technology, predicted the practice of sharing revenue between casinos and game suppliers will grow more widespread over the next few years.

But the chief slot buyer for Bally's hotel-casino indicated casino operators will continue their fierce opposition to splitting slot win with manufacturers.

"Participation games such as Megabucks and Wheel of Fortune should be placed in the worst locations in the casino because they make less money," Charles Lombardo, Bally's senior vice president for slot operations, said Tuesday.

"That's okay, because part of the money they do make goes to somebody else."

But Bob Bittman, executive vice president of product development for IGT, said slot makers will introduce more such games -- which frequently link many slots into "wide area progressive systems" (WAPS) that produce large jackpots -- because players demand them.

And he defended the revenue-sharing nature of the games, saying the cost of research and development must be borne by slot makers and casinos alike.

Technological advances and the slowdown in new casino openings nationwide have resulted in more emphasis on developing advanced software programs that can run the graphically appealing slots players demand, while increasing the machines' player tracking capabilities in a format that can be quickly and inexpensively changed to introduce new games as demand warrants.

"The critical mass isn't there to sell boxes anymore," Bittman said. "And if we're going to become a software industry, a lot has to change.

"We're all competing with (Microsoft Chairman) Bill Gates for software engineers," he said, noting the demand for college graduates capable of developing the programs for new games far exceeds the supply.

"There are 75,000 more openings for software engineers each year than come out of school. And if we can't pay competitive wages, we won't be competitive with the rest of the technological world."

Bittman also told about 300 casino slot managers and game-manufacturing executives attending a day-long seminar at the World Gaming Congress & Expo that it takes three to 10 times as many hours to develop new games as it did five years ago.

The higher costs have helped push the price of an average new slot machine to about $8,000 from about $6,000 just two years ago. The price increases and slower growth in slot revenues nationwide have led to a slowdown in purchases of new machines compared with the first half of the 1990s, when new casinos were sprouting up all over the country.

The price increases also have affected plans for the mix of slot products planned for some of the new resorts opening along the Las Vegas Strip.

Both Lombardo, who is planning the slot floor for Hilton Hotels Corp.'s new Paris resort, and Greg Shay, vice president of gaming operations for The Venetian hotel-casino, said the average 30 percent-plus increase in machine prices have put severe pressures on budgets approved two to four years ago, when their projects were still in the planning stages.

But Robert Oseland, vice president of slot operations for Bellagio, indicated the $1.8 billion Mirage Resorts project opening Oct. 15 has spared no expense in designing and filling a slot floor with machines that don't clash with the property's elegant ambiance.

"The cabinetry and signage will be thematic and color-compatible with the overall look of the resort," he said.

And in keeping with Bellagio's effort to target the high end of the gaming market, Oseland said Bellagio will offer a very small number of low-limit slots.

"At a new resort opening, there is typically large demand and limited supply," he said. Slot managers can profit from that demand either by boosting the house hold percentage, which can have long-term negative effects on player perceptions, or by concentrating on higher-denomination slots.

"Bellagio will be a very strong $1, $5 and $25 house," Oseland said. It will be a strong IGT house, as well.

"We're strong believers in the IGT product line," he said, because it is producing new high-tech slots that can accommodate future developments in game design without forcing casino operators to buy new boxes for each new game.

Overall, said moderator Shannon Bybee, executive director of the UNLV Gaming Institute, the slots designed by IGT and competitors such as Alliance Gaming, Silicon Gaming, Casino Data Systems, Anchor Gaming and others "offer a great deal more variety for the customer."

"In the future, we'll end up with a box on the floor that can be dressed up or down as desired, and software that can be changed frequently ... to come up with new and exciting games," he said.

And in all likelihood, the game makers will end up with the winning hand in the revenue-sharing battle with the nation's casinos, which generate more than 65 percent of their gaming win from slots.

That heavy reliance on slots and the increasing cost of buying new machines outright could make cash-strapped casino operators vulnerable to game makers who insist their hottest new products be participation games.