Look of bingo machines changing

By Liz Benston

Thursday, March 11, 2004 | 11:13 a.m.

The spread of bingo games that resemble slot machines is expected to pave the way for a day when casinos can quickly reprogram new games into existing machines from a central computer terminal rather than buying new machines every several months.

On Tuesday, the first day of the bingo industry's premier trade conference in Las Vegas, gaming company executives said they already are creating or selling games that will one day be cheaper and more efficient for casinos to operate.

"The average life (of new slot machine concepts) in Las Vegas is six months," said Ron Harris, president and chief executive of Rocket Gaming Systems, an Oklahoma-based company that has sold high-tech bingo devices to tribes since 1997.

Many electronic bingo games are run from a centralized computer system from which casinos can download games onto individual machines. Traditional slot machines are run as individual units, with the outcome of each game governed by its own computer chip. Electronic bingo devices are legal in Nevada but state regulators have not yet approved systems that allow casinos to simply download new slot machine games on demand.

The federal government allows Indian tribes to offer so-called "Class II" games, a federal classification created in 1988 that includes bingo games and was amended in 2002 to include more specifics on electronic versions of bingo games. The definition of Class II games has been subject to legal disputes for years. Manufacturers have pushed the envelope by creating new gambling devices that look less and less like the bingo cards of old and more like slot machines, which are illegal in many states. State and federal regulators have responded by suing and, in some cases, shutting down games.

Some analysts say the U.S. Supreme Court's refusal last week to hear an appeal of a federal decision in favor of tribes clears up most of the legal uncertainty surrounding the games. The court decision will become a key bargaining chip for tribes as they pressure states to offer traditional slot machines in the years to come, experts say.

Unlike slot machines, Class II machines don't require tribes to negotiate a casino compact with the state, effectively cutting the state out of any potential slot machine revenue.

They're also cheaper to upgrade than slot machines, which are either replaced outright or are revamped by purchasing an upgrade kit from a manufacturer, Harris said. Bingo game systems also allow casinos to more closely monitor how gamblers are betting, allowing manufacturers to lure players with more attractive features, he said.

Until more recently, Class II games were made by smaller companies closely connected to tribes rather than large, publicly traded corporations. Slot giants such as International Game Technology of Reno and Alliance Gaming Corp. of Las Vegas have been waiting on the sidelines for developments like last week's Supreme Court decision. In the meantime, IGT has already developed some Class II games and plans to roll them out to tribal casinos later this year. Alliance Gaming, which announced a bid in November to purchase Class II maker Sierra Design Group of Reno, has similar plans. In January, Alliance announced a deal with Rocket Gaming to supply popular game titles for Rocket Gaming's tribal customers.

Because many Class II machines resemble Las Vegas slot machines, most gamblers don't even realize they are playing a bingo game instead of a slot machine, bingo managers say.

The machines also are opening a lucrative market for tribes among people who wouldn't otherwise gamble using paper bingo cards, said Michael Lombardi, a tribal casino consultant and former bingo hall manager.

"Bingo is seen as a game for old people ... but that's really changing," Lombardi said.

Most people gambling at the Seminole tribe's bingo hall in Florida, even older customers, are now using electronic devices instead of paper versions, said Jim Clark, a bingo department manager for the Seminole tribe.

The tribe will be opening two major Hard Rock hotel-casinos in Tampa and Hollywood, Fla., with a big lineup of Class II slots. The casinos are licensed by the Hard Rock Cafe restaurant chain and owned by the Seminole tribe.

The Tampa casino, some of which opened last year, is expected to be unveiled in full next week with at least 1,500 bingo machines -- some of them carrying well-known IGT brands such as "Red White and Blue" and "Double Diamond" -- as well as 250 hotel rooms and several restaurants. The Hollywood casino is expected to open in early April.

The Seminole tribe was one of the first nationwide to challenge state authority and introduce high-stakes bingo. Florida, which doesn't yet allow traditional slot machines, has unsuccessfully fought the expansion of tribal gambling for many years.

Electronic bingo games will eventually carry many successful slot machine brands, drawing more slot players to bingo and vice versa, executives said.

"When we import (slot machine brands) to Class II games, we don't import the losers," said Knute Knudson, vice president of administration for Sodak Gaming, a South Dakota-based subsidiary of IGT.

States that allow bingo for charitable purposes may revise their laws to allow electronic bingo devices, which are more lucrative, said Eric Casey, director of sales for Bingo King Co., an Iowa-based bingo device maker.

Steven Kent, a gaming analyst with Goldman, Sachs & Co., this week released a report estimating that the slot industry in the United States will grow by about 131,000 machines over the next four years, adding to the current slot market of about 750,000 machines.

Some analysts say this expansion will top the existing slot machine growth trend in recent years, which was largely driven by sales of "cashless" machines that replaced existing slot machines that only dispensed coins.

"We believe this is a turning point for the industry and one that may have a domino effect on legislators, resulting in greater proliferation of (slot machines) as well," Kent wrote. "We think that slot expansion in the tribal gaming world will be less dependent on the passage of gaming bills by legislators."

The opening of the Class II market is expected to create a potential market over the next four years for an additional 30,000 machines each in California and Pennsylvania, and an additional 7,750 or so machines in Maryland, among several other states, Kent said. U.S. casinos -- concentrated in Florida and Oklahoma -- now have about 20,000 Class II machines, he said.