Slot makers call bill on casino participation ‘un-American’

Tuesday, Feb. 23, 1999 | 9:59 a.m.

CARSON CITY -- The giants of the gambling industry -- the big casinos in Las Vegas and the major slot machine makers -- are ready to do battle over millions of dollars.

The judiciary committees of both the Senate and Assembly Monday asked that bills be prepared that are sought by some major resorts to restrict the way slot manufacturers, such as International Game Technology, do business.

There were rumors last week the legislation was in the works. Monday was the last day legislative committees could ask for bills to be drafted. The legislation makes it unlawful for the manufacturer of a slot machine to receive a percentage of the profits or a royalty or license fee for use of the machine.

IGT, Anchor Gaming and other large manufacturers, under the bill, would have to sell the machines and systems, such as Megabucks and Quartermania, to casinos -- which now pay a piece of win to the slot makers each month.

Mike Sloan, a vice president at Circus Circus Enterprises and newly installed president of the Nevada Resort Association, said these major manufacturers won't sell the system. "They just want 20 percent of the gross revenue forever."

It's just like a car salesman, says Sloan, who won't allow a customer to buy a car but will lease him the vehicle forever.

Sloan, a former state senator, said other states have put a stop to this practice.

Former Attorney General Brian McKay, senior vice president and general counsel for IGT, countered, "This is a free market economy. If they don't like these games, they don't have to take them. But why make it illegal so nobody can have them?"

McKay and lobbyist Sam McMullen said IGT and other slot manufacturers have invested hundreds of millions of dollars in research and development to come up with new ideas that the casinos and the slot players want. "Megabucks is a good example," McKay said.

The casinos, McKay said, "write us a check every month as part of the arrangement." The casinos keep part of the win, he said, and IGT gets a small percentage to build up a reserve for the jackpots and to pay the cost of operation.

"This enables little and big casinos to offer the opportunity to players to win millions of dollars," McKay said.

McMullen said the bill sought by Circus Circus is "un-American." And the small casinos could never afford to buy the system because of the high upfront costs of research and development on the machines by the manufacturers.

Circus Circus is not alone in this fight, Sloan said. Other clubs in Las Vegas and Northern Nevada and some slot machine route operators also back this legislation. He predicted the Nevada Resort Association would soon join the battle.

What irks Sloan and others is that slot manufacturers receive a percentage of the gaming revenue from the slots but are not paying the gross gaming tax of 6 1/4 percent that is assessed the casinos.

"We're the ones who take the economic risk ... we build the casinos and pay the taxes," Sloan said. "The operators are committed to Nevada. The manufacturers are here today and gone tomorrow."

It's the manufacturers who make the machines obsolete so they can sell more, he says.

IGT's pre-tax profit, Sloan said was 35 percent and its return on investment was 20 percent. "Ours (the casino industry) is 3-6 percent. We think the Legislature needs to look at the economic health of the industry."

McMullen said casinos are asking for new machines all the time. And it would be impossible for many to pay the upfront cost of ownership considering the research and development dollars that are needed to produce these new units, he said.

Greg Ferraro, the lobbyist who presented the proposal to the committees, said there is a difference between casinos and slot machine makers. He said discussions between the opponents "are on-going." But McKay said the clubs have never talked to IGT, which supplies about 70 percent of the slot machines.

Ferraro said, "We are going to hold off on some of the arguments" until the bills are actually introduced and scheduled for committee hearings.

"It's anybody's guess when we will see it again," he said.