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BYI was probably the standout – at least relative to expectations.  Not much to cheer about yet but slot sales should pick up next year.

General Takeaways 

  • The pricing environment was going to be more sensitive this year so even if manufacturers raise prices they are going to give away more discounts/ promotions in the form of aggressive rebates.  We heard that IGT was running a 3 day promotion where if you turned in an old IGT machine, they would give you a $7k credit towards an MLD.  Konami and ALL aren’t raising prices this year.  Konami is running a trade-in promotion where you get $2,500 either by turning in the machine or just removing old machines from the NA market.
  • Everyone has wheels and the participation market is going to remain hyper competitive; this is not good for IGT despite their good content. On the bright side, IGT is becoming much more efficient in repurposing existing participation real estate.
  • Everyone is focused on iGaming down the road and the 500 pound gorilla issue of how to attract a younger player to the slot floor.  Almost everyone had some sort of “skill” based element built into their bonus rounds on the progressive games.
  • Video Poker is gearing up for a replacement cycle and WMS intends to compete.  Either way, a replacement cycle will be good for IGT – over 100k of their Video Poker games are on the 8960 platform which is over 9 years old.
  • 3 Reel Spinners are also coming up for a replacement cycle so there is more attention on the R&D front there from several manufacturers- BYI, IGT and Konami
  • WMS isn’t broken per say but will take a few quarters to get back on the right path
  • Greece will be a good opportunity for the US manufacturers but not in Phase 1 since OPAP is highly likely to pick Novamatica and LTO as their 2 suppliers for the first 16k games
  • A few small guys continue to make traction – ARUZE and AC Coin
  • A pick up in the replacement cycle of any material magnitude remains illusive although that’s offset by the likelihood of good news coming out of new jurisdictions like IL and MA by year end

WMS

We walked away from the conference feeling a little better about WMS.  That said, they have a tough 2 quarters ahead of them and may miss expectations.  

What went wrong?

  • WMS got carried away with putting 'too many apps' in the box without considering the tough environment.  They looked too far out and not at what clients want now.
  • WMS developed games without consideration for regulatory approval and therefore, shot themselves in the foot since they had already built investor expectations on meeting certain release dates.  By getting stuck in the regulatory cogs, they had no product to refresh aging and waning game ops titles.
  • As they got larger, they experienced growing pains in logistics by taking their eyes off what they do best–game R&D
  • In the meantime, the economy got worse, customers got more price sensitive, competition got more fierce and WMS had no new product.
  • Delays delays delays:  IL VLTs, Italy, Portal Apps, Game Ops approvals

However, WMS has simplified their products and is much more focused on delivering gaming ops content over the next twelve months. Also, WMS has a new cabinet in the works that looks like a pinball machine with just a flat screen.

IGT

Leveraging their platforms with lots of new content has saved them a lot of money on R&D.  The cost to refurbish some of the game ops boxes dropped a few hundred from $4,500.  IGT is basically just sticking with what they do well – developing good product and taking advantage of developing content for an aging install base of 3 Reels spinners and Video Poker.

Their message was "expect more" – offering a lot of core for sale product with lots of new titles.  New G23 cabinets with the new MLD that has sharper graphics (photo realistic images) has been out since Feb 2011. They have 55 titles, many of which clone math models which already work well on their top games.  Other ones have new game and play mechanics.  85% of their content is available on MLD formats.

IGT has been refocusing on 2 markets that haven't had new content in a while – 3 Reels and Poker. They have an install base of 130,000 video poker games, 100k of which are on the old 8960 platform.  IGT is also introducing a premium for-sale product where they sell the base game and then charge $10/day for each device linked to the bank.  This looks like a response to WMS's portal applications.

BYI

BYI has been making good use of their iDeck to introduce new skill like components to bonus rounds.  By leveraging their systems with more software products, it looks like they may finally get some traction with iVIEW DM which would be great for growing their recurring revenues.  BYI is also the leader in TableView technology.  They are addressing the issue of investors being concerned that they are too dependent on reels with more video product and the Pro-Curve product.

ALL

Aristocrat is focusing on delivering a lot more content to the Verve content on the Game Ops side.  They have a new reel product called Hybrid Steppers, which has transmissive like functionality during bonus rounds.  ALL's pricing on for sale products is likely to be static aside from paying more for some new features like the LED buttons.

Konami


Konami is putting more focus on video and not raising prices.  They expect to see an increase in sales YoY again this quarter but sees no general pick up in replacements.