Pokies and Slot Machine Information

Gaming expansion in USA?

A recent posting touched on the decision by the US State of Pennsylvania to allow the installation of up to 61,000 slot machines - mainly in and around racetracks. This creates a huge new business for gaming machine manufacturers.

Slot Machine Blog Article

Even after the addition of 61,000 slots, the number of gaming machines per capita in the USA will fall well short of what it is in Australia.

In 2004, the total estimated number of slot machines in the USA, including the 61,000 new devices approved for Pennsylvania, was: 770,408 (source: NWSource Article)

In Australia, the estimated total number of slot machines in 2005 was 197,107.

*Average slots/State reflects the average number of slot machines present in each State which allows slots.

#Estimated breakdown of gaming machines by Australian State:

So what would it mean for the slot machine makers if the saturation of pokies in the USA eventually reach the level its already at in Australia? Money! And plenty of it. At present there are 387.32 people per slot machine in the USA, versus 104.64 people per slot machine in Australia.

To catch up, the USA would need to install 2,081,275 additional slot machines. The cost of each unit is highly variable, but an estimate of USD$11,000 per machine means there is potentially USD$22,893,981,000 ($22 billion dollars) in new business to be had.

Is it likely the USA will catch up to Australia in slot machine penetration? Its not going to happen soon, but it may at least catch up to half the difference in the current level - around $US10 billion in new gaming machine hardware business. Slot machines require maintenance and eventual replacement - another huge source of potential revenue.

Aristocrat upbeat

One of the worlds largest slot machine manufacturers, Aristocrat, is confident about its future. After a rough and tumble couple of years it is making hefty profit and its CEO made the following observations:

“Beyond 2006, the outlook for the following few years also looks positive,” Mt Oneile said. The global gaming market continues to expand and as we gather momentum with our wider product range, and as our new technologies are introduced to the industry, I am optimistic that our long term objectives will be achieved.”

The Age Article

Interestingly, Australia is the ancestral home of Aristocrat, yet represents only its third largest market (source: 2005 Annual Report). Both the USA and Japan are producing higher revenues.

Pennsylvania pushes 61,000 pokies

The US State of Pennsylvania is pushing ahead with its grand scheme to introduce up to 61,000 slot machines.

“On April 5, state gambling regulators will begin public hearings on proposals for slots at 14 venues, including racetracks and freestanding locations, which could make Pennsylvania one of the biggest slot-machine states in the country. Slots could be up and running at the racetracks as early as the fall.”

Myrtle Beach Online Article

The potential sale of 61,000 slot machines was bound to attract the industries largest manufacturers, keen to showcase their latest technology. Pennsylvania has set a punitive 52% tax rate, yet they’ve had no trouble soliciting vendors to supply the gaming hardware:

“And many of the biggest companies came despite the exclusion of table games and a tax rate of 52 percent, more than six times higher than Atlantic City’s or Nevada’s.”

The companies approved so far are:

“The Pennsylvania Gaming Control Board…approved the licenses for the following six companies…
• Aristocrat Technologies, Inc.
• Aristocrat Technologies Australia Pty. Ltd.
• IGT
• NRT Technology Corp.
• Western Money Systems
• WMS Gaming, Inc. “

Pennsylvania Gaming Control Board

The legislation allows for up to 5,000 slot machines in some venues. The nearby Altantic City gaming venues have already started building up their own venues in view of the upstart new slot competitors being created in nearby states:

“Atlantic City is in the midst of an approximately $3 billion building boom to diversify its gambling industry and expand its casinos, in part to compete with the proliferation of gambling in neighboring Pennsylvania and elsewhere.”

As more and more States in the USA legalise slot gambling, the competition to attract players will intensify. It will be interesting to see how the huge Indian casinos and the gambling metropolis of Las Vegas react.

Woolworths is pokies king

Australian icon and megagrocer Woolworths continues to absorb hotel operators, and their slot machines.

“Woolworths has grown into one of the biggest gaming machine operators in the country with 10,722 pokies — nearly 6000 of them in Victoria “

The Age Article

Poker machines are a safe bet for any business - its pretty difficult to make a loss when you have these electronic safes working on your behalf. When you have 10,722 of them working for you, your profit margins are only going to improve.

It seems the acquisition of the pokies is only incidental to the real goal of Woolworths - buying up hotels so they can increase their presence in the oddly regulated liquor market in Australia. Whatever the cause, it gives Roger Corbett, CEO of Woolworths, 10,722 extra reasons to smile every day.

Portable Pokies

Casino games such as roulette are finding their way onto Personal Digital Assistants (PDAs) - those ubiquitous handheld computers you see people playing with on subways and buses everywhere. The US State of Nevada has now legalised some games for realtime gambling on these devices:

“Regulations passed Thursday make Nevada the first in the nation to approve the use of handheld devices for gambling in any public area of the state’s casinos, such as restaurants and poolsides. Rules allow a range of games, including bingo, poker, blackjack and horse race betting. Use in hotel rooms and other places that cannot be supervised is prohibited.”

MSNBC Article

The usage is restricted to public areas in casinos - but it may not take long for permitted usage to increase to citywide or even statewide. The next step after that is for slot machines to be simulated on these devices.

There is a lot of money being invested in developing the software:

“Cantor has sunk “millions of dollars” into development”

Slot machine manufacturers have enormous development resources and could easily tailor their games to run on remote units - no more jostling for slot machines to play - just take your PDA and play where and when you like.

NSW wins extra $1billion on the pokies

The Australian State of New South Wales has finally won its tax increase on pokies turnover. The increase is less than the NSW government wanted, but it can put the bitter fight with NSW clubs behind it and is still $1billion better off over seven years than it would have been if it didn’t press for any increases.

“The pokies dispute began in June 2003 when, under then-premier Bob Carr and his treasurer Michael Egan, the Government announced tax increases that included lifting the top rate from 26.25 per cent to 49.09 per cent.”

Daily Telegraph Article

Possibly the strongest reason for the government to cave in:

“ClubsNSW had started to run advertisements at NRL games telling families what sort of impact the tax was going to have. The organisation had planned to run an extensive campaign against the Government in the state election next March, including targeting marginal seats.”

As is the case in most Australian States, governments have an ever larger hand in the pocket of pokies players. The extra tax has to come from somewhere - players in that state can expect to have even emptier wallets than usual.

Pokies study in Victoria, Australia

The Victorian Gambling Research Panel (GRP) commissioned a study of the Community Impact of Electronic Gaming Machine (EGM) Gambling in Victoria and Western Australia. Published in 2005, the report summarises and compares usage patterns between the two States.

Victorian Department of Gaming Report

Some of the more interesting statistics from the report are:

Page 8: “The share of household disposable income measured in real terms spent on gambling increased from 1.30% in Victoria in 1987-88 to 3.58% in 2002-03. In Western Australia the increase was much smaller - from 1.30% to 1.6% over the same period.”

This means spending on gambling in Victoria almost tripled in disposable income terms in that period - largely due to the introduction of gaming machines:

Page 8: “the key difference in the gambling environment between the two states is the 27,500 machines available in hotels and clubs in Victoria which are not available in Western Australia.”

Page 12: “The majority of Victorians (75%) believe EGM’s do more harm than good, while a clear majority believe gambling is too widely accessible. Ex-Premiers and Mr Lloyd Williams founder of the Crown Casino (Melbourne) have expressed concern that the availability of EGMs are potentially damaging to the ’social fabric’ of communities”

Such a clear majority of those polled, and the voices of ex Premiers are an interesting insight in to slot machine prevalence and its results. If the government would reduce its tax rate to the cost of running the machines regulatory regime, and introduced commonsense restrictions on the machines themselves, player losses would be reduced to manageable levels.

The report is over 200 pages, quite dry yet very interesting. Set aside the hour or so required to read it and you won’t regret the time spent.

Clubs launch ad attack in NSW

As mentioned in a previous posting, Slot Machine Blog Article , clubs in the Australian State of New South Wales have commenced an advertising attack on the government of the state over its planned hike in taxes on slot machine turnover.

“ClubsNSW spokesman Jeremy Bath today said clubs were willing to pay an extra $1.01 billion extra in tax over seven years, but could not afford the $1.3 billion the government wants”

The Australian

The amount of revenue at stake is quite incredible - those tax revenues are ultimately coming straight out of the pockets of players. If the taxes are increased the only winner is the government.

IGT upbeat about coming years

The worlds largest slot machine maker, International Gaming Technology, has reported its expecting to increase its profit substantially over the next few years:

“Last year’s operating income topped $115 million and Matthews (Chairman) forecast international annual operating income would double within the next four years”

Las Vegas Sun Article

Also of interest in the article:

“Matthews said IGT released 172 new game themes such as Fort Knox and Party Time! in North America last fiscal year, a 38 percent increase over the previous year, and spent $138 million on research and development”

172 new games is an incredible achievement in one year. IGT’s new Blue Chip range of slot machines show that the investment in R&D is paying off. Large screens, large easy to read graphics and a smooth scrolling mechanism all make for happy players.

As noted in the article, IGT’s chairman states that his company is the best in the industry. They lead the market in the USA, but in Australia, home of Aristocrat Technologies, IGT machines are not so well represented.

Woman wins $1m, sends parents away

A lucky lady at a casino in Nevada proved that it is possible to have large wins on slot machines:

“A California woman who decided to play slots at a Reno casino while waiting for friends to go to Sunday brunch won a jackpot worth more than one million dollars … says she intends to use the money to send her parents to Germany”

Headline News

Perhaps her parents would prefer she had not won after all. Or perhaps they’ll enjoy the holiday.