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The Southern Gaming Summit: Part I

By Jeff Hwang – Updated Nov 15, 2016 at 5:33PM

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Jeff Hwang is back from the Southern Gaming Summit with coverage of the slot manufacturers and the next-generation table games systems.

I picked up a neat trick at the IGT (NYSE:IGT) booth: Just hit the "Change" button, and you can trigger the max payout on any slot machine at will.

The only problem was that I couldn't get it to work anywhere else in Tunica.

Last week, casino operators, vendors, investors, and regulators from across the country gathered in Tunica for the 13th Southern Gaming Summit to discuss key industry issues and trends, while showing off some of the hottest new gaming products -- most of which have yet to hit the casino floor. The Summit normally takes place in Biloxi, Miss., but because of the hurricane damage last year, it had to be relocated temporarily. The replacement facility itself -- the Tunica Arena and Expo Center -- was too small to accommodate the event. As a result, the conferences and several of the booths were held in a tent.

The slot manufacturers
The slot makers forum featured representatives from IGT, WMS Industries (NYSE:WMS), Bally Technologies (NASDAQ:BYI), GTECH's (NYSE:GTK) Atronic, and Australia's Aristocrat Leisure. Among the key topics were the transition to server-based gaming and licensing.

  • Server-based gaming. The general consensus is that we're still about two years away from the introduction of server-based slot machines and that the transition will be more gradual, as opposed to an industrywide tidal wave of replacement slots. One thing to consider is which type of machines a server-based system makes sense for. For example, the ability to download games on the fly will be much more beneficial on video slots as opposed to mechanical reels, for obvious reasons (the mechanical reels themselves can't be replaced on the fly) -- and the latter group represents about 45% of the slot floor.

In contrast, ticket-in/ticket-out capability -- which triggered the last replacement cycle -- applied to 100% of slot machines.

  • Licensing. Jean Venneman, vice president of product development for IGT, in particular admitted that licensing had been overdone but that the key was having a relevant property. For example, the Wheel of Fortune brand has been a smash success. Atronic's Jason Stage said that the company's Deal or No Deal slot game did only $100 per day in revenue just a few years ago, but since General Electric's (NYSE:GE) NBC brought back the show, the game's output has risen to $400 to $500 per day per machine. Atronic now has two new versions of the game.

  • New games. Some of the hot new slots from IGT include a new Star Wars game and a new variant of the popular Pharaoh's Fortune game called Pharaoh's Gold. I might have gotten carried away with the jackpots -- I commanded the max payout on a Soul Train machine with the push of a button, triggering a handpay and causing all of the Soul Train machines connected to it to freeze.

And I caused a similar problem in the Konami (NYSE:KNM) booth -- I ran.

The other slot manufacturers were immune to my touch, because they required a key and an attendant to do the trick. But in addition to a pair of Deal or No Deal games, Atronic also had its new Miami Vice game based on the old TV show, as well as a new series called Lady Orleans. WMS had some new games, as well as some recently released stuff, including the Powerball games and slots in the Clint Eastwood series. Aristocrat -- one of the top video slot players -- had some mechanical reel machines on display.

Table games systems
There's little question that table games systems involving radio frequency identification (RFID) chips, electronic card recognition, and automated table management systems are the way of the future. Among the benefits will be a streamlining of labor and improved game security, as well as more accurate player tracking. The main players include a partnership consisting of Progressive Gaming (NASDAQ:PGIC) RFID tags, IGT's table management system, and Shuffle Master's (NASDAQ:SHFL) card-recognition devices; and a competing package involving optical sensors being developed by Bally Technologies.

The real question is when the future will occur.

I think the problem at this point for the Progressive, IGT and Shuffle Master systems centers on the cost of the RFID chips, which allow the table management system to read the exact amount of bet in a fraction of a second. When a casino decides to go with the RFID chips, it will likely have to replace all of the chips. A representative from the Progressive Gaming booth said that the cost of an RFID chip is currently $1.90. So where nowadays a casino would love it if you walked off with chips as souvenirs, it might feel differently if you hoarded $1 chips that cost them $1.90.

In addition to cost, the technology may not be ready, either. The RFID technology works perfectly. The guy at the Progressive Gaming booth said that the system can read something like 1,200 chips in half a second.

However, when I visited the Bally booth, the system didn't register when the dealer attempted to perform a split during a blackjack game. Nor did it register when I went to place a bet for the dealer as a tip. Apparently, the system will account for the split if you do it in a certain way (the dealer at the booth had never dealt blackjack in a casino), and supposedly there is a program that will account for bets placed for the dealers -- just not the one I was looking at. It will make little difference if Bally's system is cheaper if it doesn't work properly.

I don't know whether the IGT/Progressive/Shuffle Master system had the same problems. Only the RFID chip recognition was demonstrated at the Progressive Gaming booth. Shuffle Master did have an eight-deck Baccarat shoe with card-recognition capability, and that, too, worked impressively.

There goes half my bookshelf
Ultimately, it's a matter of when the price of the RFID chips comes down, as there is little tangible benefit of the systems for the player and, therefore, little rush to get the product onto the casino floor. The comps won't get any better for the player -- only more accurate from the casinos' standpoint.

What the systems really do is render half of my bookshelf irrelevant. The systems are a card counter's worst nightmare. Moreover, half of the fun for players is getting more comp value from the casino than their play merits. The best book on the subject is CompCity by Max Rubin, and I recommend reading it while it still works.

For related high-stakes Foolishness, check out:

Shuffle Master is a Motley Fool Stock Advisor pick. Take the newsletter that grants you access to the very best stocks on David and Tom Gardner's wish list for a 30-day free spin.

Fool contributor Jeff Hwang owns shares of International Game Technology and WMS Industries. The Motley Fool has an ironclad disclosure policy.

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