Casino firms, suppliers assess results of balloting

By Liz Benston

Wednesday, Nov. 5, 2003 | 11:28 a.m.

The results of voter referendums in Indiana, Colorado and Maine held some victories as well as losses for the casino and gaming equipment industry, yielding mixed reactions from analysts but a cheer from the company expected to reap the greatest benefit from gambling expansion nationwide.

Voters in Maine voted to legalize slots at a Bangor race track but overwhelmingly rejected a proposal backed by Marnell Corrao Associates of Las Vegas to build a $650 million resort casino for an Indian tribe. Voters in Orange County, Ind., voted to allow a riverboat casino in the economically depressed region and Colorado voters soundly defeated a proposal to allow up to 2,500 slots at five race tracks across the state.

For International Game Technology, the true victory was in Maine, an area new to slot machine gambling. The results in Indiana and Colorado were expected but involve states that already have gambling.

"We were one for one yesterday," said Chuck Brooke, vice president of government relations for IGT. "It was actually, relatively speaking, a good day. And there was no harm, no foul, in the gubernatorial races."

IGT has predicted that at least one state will add some form of gambling each year for the next decade. Executives have called that prediction "conservative" but say it is expected to sustain the company's growth well into the future.

The results appear to follow a general trend of continued gambling expansion nationwide, though not at the breakneck pace witnessed over the past decade, said Walt Stowe, vice president of legal and compliance for slot maker Aristocrat Technologies Inc. in Las Vegas and president of the Association of Gaming Equipment Manufacturers.

Tuesday's results held no surprises for the association, which represents all of the major gaming equipment companies including IGT and its close U.S. competitor Alliance Gaming Corp. of Las Vegas.

"We follow the polls pretty closely and the polls seemed to have a pretty good read on these initiatives," Stowe said.

The racino proposal in Colorado was largely defeated through the efforts of competing casino companies as well as revelations about problems a race track operator and proposal supporter was having in Rhode Island, he said.

While the association doesn't actively lobby for gaming proposals in individual states outside of Nevada, it is exploring whether to take a more active role, he said. That role would be limited to proving information to state legislatures considering gaming, he said.

"We don't want to give the perception of the heavy-handed gamers from Nevada," he said.

Taking a position on gambling would be problematic because "we don't want to be in a position of lobbying against a group that's potentially a customer of ours. In that case we stay back and let the chips fall as they may."

In Colorado, the defeat was expected given the strong opposition from casino forces as well as problems with the main proponent of the racinos, Brooke said.

But it's not a matter of opposing gambling outright, he said. "They seem to think they have enough gambling in Colorado," he said.

Rather than see the Maine casino defeat as a negative, IGT views the ultimate outcome -- the vote to legalize slots at a Maine track -- as a net win, Brooke said.

"People were given a selection, he said. "Maine, you have to say, voted to expand gaming despite what was said."

IGT expects officials in Indiana to select a casino proposal within six months that will allow for a mid-size property offering from 500 to 600 machines.

Park Place Entertainment Corp., one of five gaming interests that has submitted casino proposals to the state, applauded Tuesday's results.

The results are a sign that "the people of Orange County, Indiana believe that a casino resort in their community can bring significant economic benefit both in terms of jobs and investment," Park Place spokesman Robert Stewart said. "We believe that a Bally's branded casino could offer significant economic benefits and were going to do our very best to try and communicate that to the people making the selection decision."

Casino analysts appeared mixed on the results.

Deutsche Bank Securities analyst Marc Falcone called the votes a "net positive" for the industry, especially slot makers.

"In our view, voters proved willing to expand gaming in jurisdictions where it made the most economic sense, a bias which could prove telling in other states where gaming is being considered," Falcone wrote in a research note today.

The defeats aren't expected to hurt the long-term outlook for gaming companies, he said.

But UBS Warburg analyst Robin Farley said the votes represented "more nay than yea" and said each victory represented a benefit of no more than one cent in earnings per share for industry giant IGT.

The casino defeat in Maine may kill future attempts in the state, said Dennis Bailey, head of the Casinos NO! opposition campaign in that state.

"(Marnell Corrao) spent (millions of dollars) to try and get this through and barely got 33 percent of the vote. That's a sign that this is going to be an uphill climb. I'm hoping the margin is high enough that we can take casinos off the table and move on.

"This was just a bum idea from Las Vegas that Maine didn't want."

Marnell Corrao representatives could not be reached for comment today.

Predicting gambling expansion is tricky, Stowe said.

In Pennsylvania in the past, for example, gaming was considered a "sure thing" but proposals stalled when legislators couldn't reconcile two versions of a bill to allow racinos, he said.

"There's no certainty it's going to pass because there seems to be some pretty strong philosophical differences" between the two bills, he said.

Analysts already are looking ahead to states such as Pennsylvania, Maryland, Ohio, Massachusetts and Michigan that are discussing or proposing gambling expansion.

California also remains a hot button state, Falcone said.

"Once Gov. Schwarzenegger settles into office, we would expect compact negotiations for new and existing tribal casinos to commence," he wrote.