Extract from - ‘The Stinger Report' - "New Blood – The Future of Gaming is Terminal?" (#767)
Main REPORT:
The emergence of international applications for Video Gaming Terminals (VGT) seems to have marked a major sea change in the way people are prepared to play, with gambling now being added to the mix of interactive play. Having tracked recent developments, the Stinger takes a long hard look at this emerging sector, and examines the international implications of this most controversial Digital amusement:
~ America
Just as the pinball industry celebrated its 120 anniversary, the amusement trade is looking at VGT as a modern reincarnation of what pinball and mechanicals represented in the 1920s and 1930s: a "harsh economic condition entertainment system!'' The 'nickel-robbing' systems of the early days were treated as pariahs, and nowadays VGT's and some of the Floridian gaming machines are seen in much the same way. Indeed, there are serious concerns that Video Poker literally "steals the grocery money our of peoples pockets!''
As was outlined in an intuitive piece in Popular Mechanics, pinball in the 1940s was considered a game of chance, not skill, and so was defined as a form of gambling and thus illegal. At this time the machines were simplistic application minus flippers, with developments to address these criticisms not being invented and applied until 1947. The New York police carried out prohibition style raids, swooping on pinball machine operations. The rivers of New York were littered with dumped illegal pintables, while the US coin-operated trade association chose to remain oblivious to any need for change..
That said, it was the efforts of the coin-operated amusement lobby that saw the illegality of amusement pinball overturned in 1976, the high point of the campaign being a demonstration of the skill needed to play the then-modern systems to city councilmen,. However, it has to be remembered that some American territories continue to treat pinball machines with moral suspicion; Ocean City, NY, for example, still bans their play on Sundays.
This grey area now seems to be occupied by 50-States Video Lottery Terminals (VLT). Legally authorized by state government in conjunction with supervised lottery schemes, these POS (Point of Sales) kiosks do not include a major ‘game' element. However Video Game Terminals (VGT) sit in a no-mans-land of federal and state legislation. Neither fish nor foul, they are incredibly popular, but present a virtual minefield in terms of their place in a modern amusement and gaming market.
State legislation seems to constantly run foul of VGTs, and vice versa. The North Carolina appeals court heard arguments in a case over whether allowing Cherokee Indians to operate video gaming negated the otherwise statewide ban on the machines. In Illinois, Betson Midwest, a division of H. Betti Industries, announced that it had entered into a distribution agreement with WMS Gaming Inc. to be the exclusive distributor of WMS products for the upcoming Illinois Video Lottery Market. This follows the July 2009 legalization of use of Video Gaming Terminals (VGTs) at licensed liquor locations - bars, restaurants, truck stops, and fraternal and veterans' organizations. The question has to be raised as to how this form of gaming will impact on future amusement investment.
The impact of the VGT has seen a change in Chicago law designed to address the tsunami of investment in this platform. However, in Florida, law enforcement officers have raided a number of illegal operators of systems. Meanwhile, New Jersey facilities, having had their Video Lottery Terminals (VLTs) removed in a recent local government ruling, were given a stay of execution after an appeal was posted with the provincial government of the state, extending their usage for six-months while the proposition was reviewed. Some 600 VLT licenses (2,000 odd machines) had been granted; however, even with the extension for a review, the number of licenses will still be cut to below three hundred. This despite non-profit operators of VLTs stating that the revenue generated by these machines was essential.
The trade speaks in hushed tones about the erosion of conventional amusement and gaming systems in the face of the VGT and VLT alternative. Some manufactures have been accused of a 'dirty little secret': clandestine support of these terminals as an off-the-books product line in the form of unofficial black-box manufacture to generate much-needed revenue. Likewise the trade associations have revealed their impotence faced with the ramifications of censure, making this a very open 'dirty secret'!
NOTE ~ It has to be remembered that a number of US States (and Canadian provinces) have legitimized the use of VLT systems since South Dakota first allowed these systems in 1989. In the current Global Financial Conditions (GFC) it has become easy to look upon VGTs and VLTs as easy tax revenue generators for the hard pressed legislator. However the complication of adding a gambling element to amusement has fallen foul of many other states. Since the 1990s the situation has become even more complicated with the trend for 'Racinos' (horse racing tracks with added casino elements) to look towards VGT as a major component of their operation.
Breaking Stinger News ~ It was announced in the USA that Lottomatica Group S.p.A. subsidiary SPIELO Manufacturing ULC had signed an exclusive distribution agreement with American Gaming & Electronics, a wholly-owned subsidiary of Wells-Gardner Electronics Corporation, to distribute 'SPIELO's prodiGi Vu' Video Gaming Terminal (VGT) and game content to licensed operators in the new Illinois VGT market.
If matters are confused in the US, it seems that things are no better internationally!
~ Europe
From the UK perspective we see that Fixed Odd Betting Terminal (FOBT) system ~ a VGT equivalent - that has emerged in the UK as a brand new, albeit grey, area of video amusement. The market has seen a major deployment of FOBT systems deluge the License Betting Office (LBO) scene (in other words, the entirety of the country's retail gaming operation) with between four and six terminals on each site. This phenomenal placement has seen the under sung genre of the predominantly coin-operated amusement platform, surpassing Amusement With Prizes (AWP) installation.
This shadowy new market has become an incredibly profitable sector, though its grey area has meant it is not well publicized by those profiting. The hoped-for reform in the UK gaming laws, following changes in the British Government, was expected to address the grey area that FOBTs inhabit. But the implosion of the UK trade to defend and promote its core activities has allowed the FOBT to rule the roost. The market has also seen problem gambling rise, with 51,000 contacts to the gambling support lines at GamCare in 2008, (an increase of 21% on 2007) – the support service for problem gambling.
NOTE ~ With the appointment of the new coalition UK Government, a whole can of worms has been opened regarding the ability of the UK trade association (BACTA) to support its membership. It has been reported that the new government is adamant that, with a increase in Value Added Tax (to 20 per cent), efforts will now be made to collect back-dated tax from what have been seen as offending SWP (Skill With Prize) machines. This now means that for some operators it would be best to cut their losses and revert to a VGT style of business.
The LBO revenues have seen their traditional business of horse racing decrease by 20 per cent while the FOBTs in their locations have exploded in popularity. It is not unusual to see office workers crowding around the fixed odds machines to play; the immediate gratification of this quick bet game investment appealing to a centralized (quick-fix) audience previously ignored by the more traditional AWP and SWP developments of a tired and staid amusement trade.
Adverse publicity is growing: BBC News reported on the problem of FOBT and Problem Gambling early in 2010. However, investment continues to grow in the rush to capitalize on this popular market. LBOs have committed to what they see as all-inclusive 'Betting Terminals', the first part of a concerted move towards a fully digital POS (Point of Sale) entertainment kiosk to support their counter business.
Meanwhile Inspired Gaming Group, the UK-based developer of Open Server-Based Gaming and holder of a 41 per cent market share of FOBT sales in the LBO sector, recently announced software and manufacturing agreements with Astro Corp. Under the agreements, Astro Corp will manufacture and supply gaming terminals for Inspired's use, while Inspired will supply Open SBG software to Astro Corp and its customers in Italian Video Lottery Terminal (VLT) gaming venues.
In the struggle for survival the amusement trade has decided to adapt by fighting against these self styled Video Slot Gaming terminals with its own Video Amusement with Prizes (VAWP) terminals. More than 100 UK pubs now utilize this type of platform to compete with FOBTs. This ‘ticket out' machine technology, by such companies as digital gaming supplier Games Media, has been designed to replace the coin payout method by printing a ticket receipt once the player decides to collect his prize. The receipt is then handed over at the bar in exchange for cash.
For the LBO sector the advantages of dominating the emergent FOBT scene are obvious, given the British Government's plans to sell The Tote (or Horserace Totalisator Board). Originated by Winston Churchill in 1928 as a safe haven for punters, controlled by the state and beyond the reach of illegal bookmakers, The Tote currently employs 4,000 people. 2003 figures report that it saw half-year profits jump 39 per cent to £9.2m in 2003, with turnover at £700m. With a sold Tote and a new government keen to generate tax based revenue, FOBT business looks set to become a major source of (possibly secret) revenue for a considerable number of amusement manufacturers, whatever the vagaries of their legitimacy.
Breaking Stinger News ~ Just as the amusement trade attempts to restructure its association run exhibition (EAG), news broke that the original IGE show was undertaking a fundamental change to address BACTA's departure and the insurgence of the gaming scene. The Clarion Events organized IGE will now re-brand itself back to its original name – the now 'International Casino Exhibition' (ICE), will represent all strands of the gaming experience comprising casino, remote, street, bingo, betting, online and lottery. This new development will also see a major campaign to promote the gaming prominent event, (Clarion's attempt to defend their UK patch from competitive gaming trade shows). As FOBT and VGT plays' a new component for traditional amusement developers; this emergence of a dedicated event may have interesting impacts on the BACTA owned EAG.
For example, as reported in Intergame, Sceptre Leisure opted to sell its non-core FOBT rental business of over 700 terminals and associated contracts with customers, originally valued at £2.8m. The new owner of the operation was revealed as Global Draw, who had been reported as paying a total cash consideration of £3.75m. This a clear illustration, not only of the value of the FOBT market, but also of the issues surrounding the best way to grow business in this grey area. InterGame also revealed that illegal gaming machines had been seized from two locations in Liverpool. Over 10 units of what were called Category B2 and C systems were seized by UK Gambling Commission representatives, acting alongside Her Majesties Revenue and Customs (HMRC). These machines were reported to have no license and will be destroyed. This new UK Government appears to be beginning to utilize improved tax collection schemes as well as addressing the grey-areas of business practice in machine operation – an initiative started in 2008.
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News Story with thanks to Kevin Williams.
1910
