IL approvals decelerate in November
Following its board meeting, the Illinois Gaming Board (“IGB”) released a list of all licensees as of November 16th. The list included 605 licensed establishments, implying approval of an incremental 108 establishments in November. This marks a big deceleration over the 164 granted in October. To date, there have been no establishment licenses revoked and 25 establishments have been denied licensure. There has been one terminal operator who had its license revoked along with one manufacturer and 22 terminal operators that have been denied licensure. Currently, there are 2,659 establishments pending approval, up 6% from October.
Each location can have a maximum of 5 machines so 605 approved locations imply a current maximum market size of 3,025. On October 10th, after 3 weeks of testing, the IGB allowed 65 establishments to go live with VGT gaming. In the September quarter, BYI and WMS recognized several hundred game sales into IL. In the December quarter, most suppliers should be able to recognize revenues associated with placements in this market.
Our best guess is that 3,000 VGTs will be shipped to IL in 2H2012, and by the end of 2013, the market should comprise of about 10,000 units. Given that we are just in the 6th month of establishment approvals, it’s too early to say whether these estimates will come to fruition. We expect that most of the VGT sales (upwards of 75%) will come with some sort of financing, but most will be accounted for as for-sale machines.
Our understanding is that ASPs should be around $12k range. The consensus is that VGTs will win about $100 on average per day, with a large range depending on the location. We believe that distributors receive a 10-15% cut of the purchase price as their commission, with the big suppliers paying on the low end of that range and some of the smaller guys paying at the higher end of that range. Typically, distributors take the machines on a consignment basis, meaning that suppliers cannot recognize revenues until the machines are placed in the establishments.
DETAILS ON PENDING APPLICATIONS:
Manufacturer: 2 (including Speilo)
Terminal handlers: 191
Terminal operators: 14
Establishments: 2,659 pending