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The slot picture is not as ugly as many believe.

Replacement demand is growing nicely.  The problem is that the industry is in a bad stretch for new casinos and expansions.  Next year, the two start to grow at the same time.  Is this the beginning of the long awaited growth phase for slot suppliers?

Now that the numbers for Aristocrat are out, we know how many units and dollars the “big five” manufacturers reaped from this ‘challenged’ market in the first half of 2011.  We estimate these suppliers represent about 95% of total North American slot sales.

Approximately 34k new slots were sold in 1H11, a 3% increase from 1H10.  The vast majority of new slot sales came in the form of replacements – which we estimate accounted for 84% or 28.6k of total slot sales compared to 77% of total slot sales in 1H10.  Replacements increased 13% YoY while sales of new and expansion slots declined 31% YoY.  Based on our research, replacement shipments bottomed out in 2008 at 38k units and have been increasing ever since.  Unfortunately, any growth in replacements has been offset by the absence of new market growth and lack of expansions.  That should change in 2012. 

LOW AND BEHOLD: REPLACEMENTS HAVE BEEN ACCELERATING! - unit shipments 2

SHIP SHARE OBSERVATIONS


In the first half of 2011, Konami and IGT gained market share YoY.  BYI’s share market share remained flat YoY, while WMS lost 4 percentage points of share YoY and ALL’s share fell 1% YoY. For 2Q11, BYI, IGT and Konami gained share YoY while ALL and WMS lost share YoY.

  • IGT:  2Q ship share of 28% and 29% in 1H11, compared to 28% and 27% for the same periods in 2010 and better than full year 2010 share of 27%
  • WMS:  2Q ship share of 25% and 23% in 1H11, down from 28% and 26% for the same periods in 2010 and full year 2010 share of 25%.  We believe WMS overshot for a couple of quarters but share around 25% is probably reasonable going forward
  • BYI:  2Q ship share of 18% up from to 17% in 2Q10. 1H11 ship share increased 1% to 15%. 2010 ship share was 15%.  With its new platform, BYI should stabilize in the high teens
  • Konami:  2Q ship share of 9% and 15% in 1H11, up from to 8% and 12% figures for the same periods in 2010. Konami’s 2010 ship share was 13%.
  • ALL:  1H11 market share declined 1% YoY to 11% 

LOW AND BEHOLD: REPLACEMENTS HAVE BEEN ACCELERATING! - ship share