When it comes to casino supply companies, International Game Technology
Smaller rival WMSIndustries
Product sales represent roughly three-fourths of the company's revenues, while the rest are primarily generated by a base of slots that earn a recurring stream of income every day, called participation revenues. So-called "wide-area progressive" machines -- the ones that often display eye-popping jackpots -- earn twice as much as their non-linked counterparts, and now constitute almost 15% of the company's installed base. During the year, WMS Industries increased this base by 2,300 slots to a total of 6,539, and it squeezed $51.27 (a 24% improvement) from each of them on a daily basis. As a result, participation revenues nearly doubled year over year to $28.6 million.
While WMS Industries may operate in the shadow of IGT, it has busily been cranking out new models that resonate with slot players. In a recent poll of slot enthusiasts conducted by Casino Player magazine, three of the top 10 favorite video slots (as opposed to the old-school spinning reel variety) were manufactured by WMS, including the ever-popular Jackpot Party, Monopoly, and Reel 'Em In. Though I seldom give in to the temptation to play slots, the last of those three nearly always coaxes a few coins from my pocket.
Of course, player tastes can change quickly, and manufacturers are more than happy to feed Harrah's
From multiline video penny slots to tiered bonus rounds to ticket in/ticket out technology to high-resolution plasma screens, slot machines are constantly evolving -- and developers are pumping millions more into research and development.
With shorter game life cycles fueling more replacement sales, and new gaming jurisdictions providing expansion opportunities, developers like WMS Industries -- which is expecting to achieve positive free cash flow this year -- should see plenty of coins in their corporate hoppers.
Fool contributor Nathan Slaughter hates ticket in/ticket out machines, and misses the unmistakable sound of falling coins. He owns shares of IGT. The Motley Fool has a disclosure policy.